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SR 06-11-2019 3F City Council Report City Council Meeting: June 11, 2019 Agenda Item: 3.F 1 of 4 To: Mayor and City Council From: David Martin, Director, City Planning Subject: Adoption of SB2 Housing Grant Resolution Recommended Action Staff recommends that the City Council: 1. Adopt the attached resolution authorizing the application for grant funds in the amount of $310,000 from the State of California Department of Housing and Community Development 2. Authorize the City Manager to execute all necessary documents to apply for the grant, and if awarded, accept and administer the grant, including any renewals. 3. Authorize budget changes as outlined in the Financial Impacts and Budget Actions section of this report, in the event that the grant is awarded. Summary Santa Monica has an extensive history that prioritizes a range of housing types (including affordable housing) to preserve and promote a diverse and sustainable community. This report seeks authorization to submit an application for grant funds to the State of California Department of Housing and Community Development for an amount of up to $310,000. The grant would be used to analyze incentives or changes to project requirements to stimulate housing production, which may include permit streamlining, height and floor area adjustments, fee reductions and modifications to affordable housing requirements in the Downtown and Citywide. Additionally, the grant funds could be used to study policies, programs and ordinances to protect and support tenants currently living in the city’s existing housing stock. This analysis would be used to propose changes to City housing policy and regulations, and may involve implementation through the citywide Zoning Ordinance and/or specific and area plans. The State’s grant program is available to local jurisdictions, and is offered specifically for the purpose of providing funding and technical assistance to help cities prepare, adopt, and implement plans and process improvements that streamline housing approvals and 2 of 4 accelerate housing production. Per HCD guidelines, grant funds may be subject to repayment if the plan or process improvement developed with grant funds is not ultimately adopted. Discussion In recent years, California’s ongoing housing shortage has underlined the need for local jurisdictions to revisit their regulatory frameworks governing housing production. In Santa Monica, the discussion has been particularly dynamic, as the community and decision-makers have wrestled with a variety of local, regional and State -level factors that contribute to production, affordability, and equity. From time to time, the City has made changes to rules and regulations related to housing in response to these factors. Two recent examples include the adoption of the Downtown Community Plan’s distinct project requirements for affordable housing, and the recent removal of the Ex tremely Low Income option from the list of options to satisfy the affordable housing obligation citywide. Further, on March 26th 2019 the Council authorized an expenditure to fund a feasibility study to analyze potential changes to the centerpiece of the City’s inclusionary housing framework, the Affordable Housing Production Program. In 2017, Governor Brown signed a 15-bill housing package aimed at addressing the state’s housing shortage and high housing costs. This package included the Building Homes and Jobs Act (SB2, 2017), which established a $75 recording fee on real estate documents to increase the supply of affordable homes in California. Through the subsequent SB2 grant program, $123M in funds collected from this fee have been set aside to provide funding and technical assistance to all local governments in California to help cities and counties prepare, adopt, and implement plans and process improvements that streamline housing approvals and accelerate housing production. This grant program is meant to facilitate planning activities that will foster an adequate supply of homes affordable to Californians at all income levels. Staff is preparing a grant application for submittal to the State’s Housing and Community Development department to fund a range of economic analyses, physical prototype modeling and policy and program evaluation that will better inform policy 3 of 4 discussions about housing production in Santa Monica. This grant opportunity can provide the City with objective market information and prototype analysis to potentially adjust existing standards, regulations and project requirements as they pertain to promoting development that is consistent with Santa Monica’s priorities and adopted plans. This multi-pronged effort would be an opportunity for the City to look at the mechanics behind housing production and conservation more holistically, and to tie together the various internal and external factors that contribute to or prevent feasibility and implementation. If awarded, staff anticipates returning to Council with a recommendation to amend an existing contract with HR&A Advisors previously authorized by Council to study modified AHPP requirements so that additional analysis could be conducted on barriers and incentives to housing production across the board. Additional sub-consultants to perform physical modeling, policy and program review as it relates to housing conservation and tenant protections, and creation of revised standards may also be necessary. The maximum grant amount provided by SB2 for a jurisdiction of Santa Monica’s size is $310,000. The outcomes of the analytical study may include the following eligible activities: 1. Updates to general plans, community plans, specific plans, local planning initiatives related to implementation of sustainable communities strategies, or local coastal plans; 2. Updates to zoning ordinances; 3. Environmental analyses that eliminate the need for project-specific review; and 4. Local process improvements that improve and expedite local planning. The SB2 program will not initially utilize a competitive process to award funds. Funds will be available to eligible applicants upon request (“over the counter”) for an eight - month over-the-counter period, commencing from the date of the NOFA, which was released in late March 2019. 4 of 4 Financial Impacts and Budget Actions Staff seeks authority to apply for a grant of up to $310,000 from the State of California Housing and Community Development Department. If awarded, staff recommends the following budget changes to the miscellaneous grants fund. FY 2019-2020 Grant Budget Changes Establish Revenue Budget Appropriate Funds Account Number(s) Amount Account Number(s) Amount TBD $310,000 TBD $310,000 Total $310,000 Total $310,000 If awarded, the grant would, upon Council approval, augment economic analysis being conducted by HR&A Advisors on the feasibility of modifying the citywide Affordable Housing Production Program (AHPP). This increase in scope to analyze development standards, fee structures, permit streamlining and other mechanics of housing production would necessitate a contract modification. Additional, but separate, analysis on preserving existing housing stock would require a separate contract with qualified housing policy professionals. Per HCD guidelines, grant funds may be subject to repayment if the plan or process developed using grant funds is not ultimately adopted. If renewals are awarded, budget changes will be included in subsequent year budgets, contingent on Council budget approval. Prepared By: Peter James, Principal Planner Approved Forwarded to Council Attachments: A. Reso - PCD - SB2 Grant Funds - 06.11.2019 B. Written Comments 1 City Council Meeting: June 11, 2019 Santa Monica, California RESOLUTION NUMBER _________ (CCS) (City Council Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA AUTHORIZING THE SUBMITTAL OF AN APPLICATION TO THE STATE OF CALIFORNIA , DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT, FOR SB 2 PLANNING GRANT PROGRAM FUNDS IN AN AMOUNT NOT TO EXCEED $310,000 AND AUTHORIZING THE CITY MANAGER TO TAKE IMPLEMENTING ACTIONS TO OBTAIN SUCH ADDITIONAL GRANT FUNDS WHEREAS, the State of California, Department of Housing and Community Development (“Department”) is authorized to provide up to one hundred twenty-three million dollars ($123,000,000) under the SB 2 Planning Grants Program (“PGP”) from the Building Homes and Jobs Trust Fund for assistance to cities to accelerate and streamline housing production by updating planning documents and zoning ordinances; and WHEREAS, the Department has issued a Notice of Funding Availability (“NOFA”) dated March 28, 2019, for its PGP; and WHEREAS, the City Council of the City of Santa Monica desires to submit a project application for the PGP to accelerate and streamline the production of housing and will submit a 2019 PGP grant application as described in the NOFA and SB 2 Planning Grant Program Guidelines released by the Department for its PGP. 2 NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES RESOLVE AS FOLLOWS: SECTION 1. The City Manager, or his or her designee, is authorized to submit to the Department an application for PGP program funds in an amount not to exceed three hundred ten thousand dollars ($310,000) in accordance with the 2019 SB 2 Planning Grant Program Application issued on March 28, 2019, and, if awarded, to use such funds for eligible activities in the manner presented in the grant application, as approved by the Department and in accordance with the SB2 Planning Grant Program Guidelines issued by the Department. SECTION 2. In connection with the PGP grant, if the application is approved by the Department, the City Manager, or his or her designee, is authorized to negotiate, enter into, execute, and deliver a State of California Standard Agreement (“Standard Agreement”) in an amount not to exceed three hundred ten thousand dollars ($310,000), and any and all other documents deemed necessary or appropriate to evidence and secure the PGP grant, the City’s obligations related thereto, and all amendments thereto (collectively, the “PGP Grant Documents”). SECTION 3. The City shall be subject to the terms and conditions as specified in the Standard Agreement, the SB 2 Planning Grant Program Guidelines, and any applicable PGP guidelines published by the Department. Funds are to be used for allowable expenditures as specifically identified in the Standard Agreement. The application in full is incorporated as part of the Standard Agreement. Any and all activities funded, information provided, and time lines represented in the application will be 3 enforceable through the executed Standard Agreement. The City hereby agrees to use the funds for eligible uses in the manner presented in the application as approved by the Department and in accordance with the NOFA, the SB 2 Planning Grants Program Guidelines, and 2019 Planning Grants Program Application. SECTION 4. The City Manager, or his or her designee, is authorized to execute the City of Santa Monica Planning Grants Program Application, the PGP Grant Documents, and any amendments thereto, on behalf of the City of Santa Monica as required by the Department for receipt of the PGP Grant. SECTION 5. The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. APPROVED AS TO FORM: _________________________ LANE DILG City Attorney 1 Vernice Hankins From:Soloff, Michael <Mike.Soloff@mto.com> Sent:Tuesday, June 11, 2019 7:42 AM To:councilmtgitems Cc:Gleam Davis; Terry O’Day; Councilmember Kevin McKeown; Ted Winterer; Sue Himmelrich; Greg Morena; Ana Maria Jara Subject:RE: Agenda Item 3F (June 11, 2019) -- Adoption of SB2 Housing Grant Resolution To the Honorable Members of the Santa Monica City Council: I am the Chair of the Santa Monica Housing Commission and write to express the Housing Commission’s opposition to Item 3F as currently drafted. Item 3F asks you to provide Planning Department Staff the right to apply for a $310,000 SB-2 grant to perform wholly unknown and unspecified studies “to accelerate and streamline the production of housing.” There is no provision for consultation with the Housing Commission and the Planning Commission regarding the contents of the proposed grant application and the proposed study. There likewise is no provision for consultation with and approval by the City Council. Yet, as stated in the Staff Report at p. 4, if the City does not ultimately adopt whatever is studied, it may be on the hook to repay the State the $310,000 from the City’s General Fund. The City’s housing goals are broader than simply producing any housing as quickly as possible. Voter approved Proposition R in the City Charter provides that “The City Council by ordinance shall at all times require that not less than thirty percent (30%) of all multifamily-residential housing newly constructed in the City on an annual basis is permanently affordable to and occupied by low and moderate income households.” While the City will produce three-times is quantified objective for market rate housing over the course of the 2013-2021 Housing Element, the City will not comply with Proposition R (even in the aggregate) over that same period. Similarly, the Council previously directed Planning Staff to explore ways to minimize the gentrification pressures in the Pico neighborhood. These are just examples. No effort was made by Planning Staff to consult with the Housing Commission prior to submitting this item. However, I personally learned of this proposal in connection with the public walk with Planning Staff in the Pico neighborhood I attended as part of the Pico Wellbeing project, and so I placed discussion of this item on the May Housing Commission agenda. At that meeting the Housing Commission approved the following resolution by unanimous vote of all members present: The Housing Commission recommends that City Council instruct Planning Staff that it only submit an SB-2 grant request if the items to be studied—if implemented—will assure the City will be in compliance with Prop R’s requirements and other City housing goals. In this regard, you will recall that you recently approved an amendment to the AHPP to permit for- profit developers to meet their inclusionary housing requirements offsite by partnering with a non- profit to do tax-credit financed affordable housing projects that will deliver more affordable housing Item 3-F 06/11/19 Item 3-F 06/11/19 Item 3-F 06/11/19 2 than otherwise would be required. You will recall doing so permitted CCSM to move forward in partnership with a developer in the Downtown to deliver more than 34% affordable housing for the project, as well as more housing overall, with the City having to deliver fewer additional units to meet Prop R than it otherwise would have had to provide. M a r k e t Units Inclusionary Affordable Units Percentage Inclusionary Units City Affordable Units Required To Meet Prop R Total Affordable Units After Prop R Met Total Housing Units After Prop R Met DCP Onsite Option 84 21 20.0% 15 36 120 DCP Offsite Option 105 27 25.0% 18 45 150 TCAC Partnership w/CCSM 105 36 34.3% 9 45 150 This stood in stark contrast to the results obtained under the AHPP outside the Downtown, where developers were taking advantage of the very minimal number of Extremely Low Income units required. The recent mixed use project at 216-234 Pico Boulevard illustrates the problem. That project adds 105 new residential units. In order to meet Proposition R’s 30% mandate, 32 of those units would have to be deed-restricted affordable units. As only eight will be deed-restricted affordable units, the City will have to spend its own funds to generate 35 additional affordable housing units just to meet Proposition R’s Charter mandate created by this project (105 private units plus 34 City financed units is 139 total units; 30% of 139 units is 41.7 units; 8 inclusionary units and 34 City financed units is 42 affordable units). Even if the City financed units only require $275,000 per unit in HTF funds because they will be part of a tax credit project, the 34 units will cost the City just under $9.4 million. You recently put into temporary suspension the Extremely Low Income option outside the Downtown while HR&A conducted a feasibility analysis (although such units continue to be a required part of the DCP inclusionary unit mix, as well as recently approved projects funded by the Housing Trust Fund). In light of the foregoing, the Housing Commission approved the following motion at its April meeting by unanimous vote of all members present: The Housing Commission recommends to City Council that it direct that the HR&A study that City Council has already told Staff to commission for purposes of evaluating the Affordable Housing Production Program (“AHPP”) outside of the Downtown should include among its scenarios the scenario where the for-profit developer partners with a nonprofit developer to build an offsite tax credit affordable housing development project in order to meet the AHPP. Unfortunately, I will not be able to be present this evening to discuss these issues—assuming such fundamental matters of housing policy and fiscal responsibility do not remain on the Consent Item 3-F 06/11/19 Item 3-F 06/11/19 Item 3-F 06/11/19 3 Calendar. I am in NYC for my job. My absence should not be misunderstood as reflecting a lack of serious concern about this item by either the Housing Commission or me personally.     Item 3-F 06/11/19 Item 3-F 06/11/19 Item 3-F 06/11/19 REFERENCE: Resolution No. 11177 (CCS)