SR 10-25-2022 5M
City Council
Report
City Council Meeting: October 25, 2022
Agenda Item: 5.M
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To: Mayor and City Council
From: Andy Agle, Director, Community Services Department, Housing and Human
Services
Subject: Adoption of Resolutions for Affordable Housing Production Program Fees
Recommended Action
Staff recommends that the City Council:
1. Adopt the attached Resolution increasing the Affordable Housing Unit Base Fee
by 10.2 percent for new market-rate apartments and condominiums (Attachment
A).
2. Adopt the attached Resolution increasing the Affordable Housing Unit
Development Cost by 10.2 percent (Attachment B).
Summary
A key element of Santa Monica’s strategy to increase housing affordability is requiring
market-rate housing developers to assist with creating affordable housing. Developers
must either construct residences that are affordable to low- and moderate-income
households or pay a fee, which is used to subsidize affordable housing built by nonprofit
developers. The City calculates and publishes adjustments to the Affordable Housing
Unit Base Fee and Affordable Housing Unit Development Cost on an annual basis, to
keep pace with changes in land and construction costs.
The calculation methodology approved by City Council uses a combination of the
annual change in median condominium sale prices in Santa Monica as a proxy measure
for land cost changes and the change in construction costs based upon the Engineering
News Record’s (ENR) Construction Cost Index specific to the Los Angeles area. The
land cost and construction cost factors are weighted based on development cost data
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for the two most recently completed or under construction multi-family affordable
developments financed by the City.
Based on 2021 sales data compiled by DQNews using Los Angeles County Assessor
and Recorder data, the weighted change for the City in median condominium sale
prices from 2020 to end of year 2021 was positive 10.6 percent. Condominium sale
prices in Santa Monica had decreased in 2020 by 10.5 percent, so the 2021 increase
represents a rebound in sale prices from the nadir of the pandemic.
The ENR Construction Cost Index increased 10.1 percent between March 2021 and
March 2022. Recent increases in construction costs began in May of 2021 and are
captured in this year’s data whereas last year’s increase was only 0.6 percent. A land
cost inflation weight of 29.2 percent and construction cost inflation weight of 70.8
percent results in a 10.2 percent increase. The table below summarizes the annual
adjustment formula calculation.
The new Affordable Housing Unit Base Fee and Affordable Housing Unit Development
Cost would be 10.2 percent higher than the existing amounts. The new amounts would
become effective December 1, 2022, if approved. The table below summarizes the
adjustments in previous years.
Historical Annual Adjustment Rate
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
0.8% 7.2% 4.9% 3.6% 5.0% 5.0% 2.2% 0.0% -2.7% 10.2%
Discussion
The Affordable Housing Production Program (AHPP), Chapter 9.64 of the City’s
Municipal Code, implements Proposition R, which establishes that not less than
thirty percent of all newly constructed multi-family housing in the City annually must be
affordable to low- and moderate-income households for at least 55 years. The AHPP
requires developers of new market-rate multi-family housing to contribute to affordable
housing goals by designating a portion of a development’s total residences as
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affordable housing, constructing affordable housing off-site, designating land for
affordable housing development, or paying an affordable housing fee, in accordance
with the following formulas:
1. Affordable housing unit base fee x floor area of multi-family project;
2. Multi-family projects with fractional affordable housing units of less than 0.75
based upon the formulas established in Section 9.64.050: Affordable Housing
Unit Development cost x fractional percentage.
When the formula calculation for required affordable residences results in a fraction of
less than 0.75, the obligation can be satisfied by payment of a fee based upon the
Affordable Housing Unit Development Cost. For example, if a development is required
to provide 4.7 units of affordable housing, the developer is required to designate four
affordable residences and pay 0.7 times the Affordable Housing Unit Development Cost
to satisfy the requirement associated with the fraction.
Annual Fee Adjustments
Section 9.64.070 of the AHPP provides that the Affordable Housing Unit Base Fee and
the Affordable Housing Unit Development Cost shall be adjusted annually by Council
resolution based on changes in construction and land costs. The fee adjustment
methodology is detailed in Section 2 of the AHPP Administrative Guidelines
(Attachment C) and reflects the methodology approved by Council in 2006. The fees are
adjusted based on two factors: 1) changes in construction costs as measured by the
Engineering News Records Construction Cost Index, and 2) changes in land costs
measured by using the proxy of change in median condominium sales prices.
The table below summarizes the changes in these two factors since 2021, and the
calculation results in a 10.2 percent increase in 2022.
Fee Description 2021
Amount
2022
Amount
%
Change
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Affordable Housing Unit Base Fee –
Apartments (per square foot) $35.50 $39.12 10.2%
Affordable Housing Unit Base Fee –
Condominiums (per square foot) $41.47 $45.70 10.2%
Affordable Housing Unit Development
Cost $372,460 $410,451 10.2%
The proposed Resolutions, Attachments A and B, would adjust the fees accordingly,
effective December 1, 2022. Details of the calculations prepared by staff for the
Affordable Housing Unit Base Fee and the Affordable Housing Unit Development Cost
are provided in Attachment D and Attachment E. The revenue implications resulting
from the proposed fees adjustment are anticipated to be minimal, as fee revenues
depend on development activity in any given year.
On September 26, 2022, the City published notice in the Santa Monica Daily Press of
this hearing and the availability of the staff analyses. The City republished this notice
on October 3, 2022. Copies of these analyses have been available in the City Clerk's
Office for public review since September 26, 2022.
Past Council Actions
August 24, 2021
(Attachment F)
The previous annual adjustment decreasing the fees by 2.7
percent.
June 13, 2006
(Attachment G)
City Council approved the methodology for ascertaining changes in
these costs and thereby calculating the adjustment.
July 21, 1998
(Attachment H)
The AHPP was adopted by the City Council and has been
periodically amended, as necessary.
Financial Impacts & Budget Actions
The proposed rate change in the Affordable Housing Unit Base Fee and Unit
Development Cost is expected to increase annual revenues by approximately $30,600
per year depending on development activity levels. Revenues will be deposited in
account 10400001.415300.
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Prepared By: Nigel Wallace, Senior Administrative Analyst
Approved
Forwarded to Council
Attachments:
A. Resolution Automatically Adjusting the Affordable Housing Unit Base Fee
B. Resolution Automatically Adjusting the Affordable Housing Unit Development
Cost
C. AHPP Administrative Guidelines
D. Staff Analysis: Proposed FY 2022-23 Annual Automatic Adjustment for the
Affordable Housing Unit Base Fee
E. Staff Analysis: Proposed FY 2022-23 Annual Automatic Adjustment for the
Affordable Housing Unit Development Cost
F. August 24, 2021 Staff Report
G. June 13, 2006 Staff Report (Web Link)
H. July 21, 1998 Staff Report (Web Link)
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Attachment A
1
City Council Meeting: 10-25-2022 Santa Monica, California
RESOLUTION NUMBER _________ (CCS)
(City Council Series)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA AUTOMATICALLY ADJUSTING
THE AFFORDABLE HOUSING UNIT BASE FEE FOR
NEW MARKET-RATE MULTIFAMILY DEVELOPMENT PURSUANT TO SANTA MONICA MUNICIPAL CODE SECTION 9.64.070(B) BASED ON CHANGES IN CONSTRUCTION COSTS AND LAND COSTS
WHEREAS, on November 8, 2005, the City Council amended Santa Monica
Municipal Code Section 9.56.070, now renumbered Section 9.64.070, to provide that
commencing on July 1, 2006, the Affordable Housing Unit Base Fee shall be
automatically adjusted annually by City Council resolution based on changes in
construction costs and land costs; and
WHEREAS, in order to implement the Council’s decision, staff formulated a
specific method of measuring changes in construction costs and land costs; and
WHEREAS, this proposed methodology was detailed in an April 24, 2006 letter
prepared by Paul S. Silvern of HR&A Advisors, Inc. (“HR&A”) on behalf of the City and
approved by the Council on June 13, 2006; and
WHEREAS, pursuant to this methodology, on June 27, 2006, the City Council
adopted Resolution No. 10149 (CCS) which established an affordable housing unit base
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Attachment A
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fee for condominiums of $28.15 per square foot and an affordable housing unit base fee
for apartments of $24.10 per square foot; and
WHEREAS, pursuant to this methodology, on July 24, 2007, the City Council
adopted Resolution No. 10229 (CCS) which incrementally adjusted these base fees by
$1.41 per square foot for new market rate condominiums and $1.21 per square foot for
new market rate apartments; and
WHEREAS, pursuant to this methodology, on July 23, 2008, the City Council
adopted Resolution No. 10329 (CCS) which incrementally adjusted these base fees by
$1.33 per square foot for new market rate condominiums and $1.14 per square foot for
new market rate apartments; and
WHEREAS, pursuant to this methodology, on September 8, 2009, the City
Council adopted Resolution No. 10422 (CCS) which incrementally adjusted these base
fees by $0.80 per square foot for new market rate condominiums and $0.69 per square
foot for new market rate apartments; and
WHEREAS, pursuant to this methodology, on September 28, 2010, the City
Council adopted Resolution No. 10529 (CCS) which incrementally decreased these
base fees by $0.41 per square foot for new market rate condominiums and $0.35 per
square foot for new market rate apartments; and
WHEREAS, pursuant to this methodology, on June 14, 2011, the City Council
adopted Resolution No. 10578 (CCS) which incrementally adjusted these base fees by
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Attachment A
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$0.66 per square foot for new market rate condominiums and $0.56 per square foot for
new market rate apartments; and
WHEREAS, pursuant to this methodology, on September 11, 2012, the City
Council adopted Resolution No. 10705 (CCS) which incrementally adjusted these base
fees by $0.26 per square foot for new market rate condominiums and $0.22 per square
foot for new market rate apartments; and
WHEREAS, pursuant to this methodology, on August 27, 2013, the City Council
adopted Resolution No. 10763 (CCS) which incrementally adjusted these base fees by
$0.26 per square foot for new market rate condominiums and $0.22 per square foot for
new market rate apartments; and
WHEREAS, pursuant to this methodology, on August 26, 2014, the City Council
adopted Resolution No. 10833 (CCS) which incrementally adjusted these base fees by
$2.34 per square foot for new market rate condominiums and $2.00 per square foot for
new market rate apartments; and
WHEREAS, pursuant to this methodology, on August 25, 2015, the City Council
adopted Resolution No. 10902 (CCS) which incrementally adjusted these base fees by
$1.71 per square foot for new market rate condominiums and $1.46 per square foot for
new market rate apartments; and
WHEREAS, pursuant to this methodology, on August 23, 2016, the City Council
adopted Resolution No. 10985 (CCS) which incrementally adjusted these base fees by
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$1.31 per square foot for new market rate condominiums and $1.13 per square foot for
new market rate apartments; and
WHEREAS, pursuant to this methodology, on August 8, 2017, the City Council
adopted Resolution No. 11069 (CCS) which incrementally adjusted these base fees by
$1.89 per square foot for new market rate condominiums and $1.62 per square foot for
new market rate apartments; and
WHEREAS, pursuant to this methodology, on August 14, 2018, the City Council
adopted Resolution No. 11130 (CCS) which incrementally adjusted these base fees by
$1.99 per square foot for new market rate condominiums and $1.70 per square foot for
new market rate apartments; and
WHEREAS, pursuant to this methodology, on August 13, 2019, the City Council
adopted Resolution No. 11191 (CCS) which incrementally adjusted these base fees by
$0.92 per square foot for new market rate condominiums and $0.79 per square foot for
new market rate apartments; and
WHEREAS, pursuant to this methodology, on August 24, 2021, the City Council
adopted Resolution No. 11356 (CCS) which incrementally decreased these base fees
by $1.15 per square foot for new market rate condominiums and $0.99 per square foot
for new market rate apartments; and
WHEREAS, Resolution No. 10149 (CCS), Resolution No. 10229 (CCS),
Resolution No. 10329 (CCS), Resolution No. 10422 (CCS), Resolution No. 10529
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(CCS), Resolution No. 10578 (CCS), Resolution No. 10705 (CCS), Resolution No.
10763 (CCS), Resolution No. 10833 (CCS), Resolution No. 10902 (CCS), Resolution
No. 10985 (CCS), Resolution No. 11069 (CCS), Resolution No. 11130 (CCS),
Resolution No. 11191 (CCS), and Resolution No. 11356 (CCS) thereby established an
affordable housing unit base fee for condominiums of $41.47 per square foot and an
affordable housing unit base fee for apartments of $35.50; and
WHEREAS, in accordance with Santa Monica Municipal Code Section 9.64.070
and the City Council’s approved methodology, staff has calculated the required
incremental adjustment to these base fees based on the changes to construction costs
and land costs that have occurred since the adjustment undertaken last year; and
WHEREAS, on September 26, 2022, the City published a notice that at the
October 25, 2022 City Council meeting, the City Council would consider a proposed
resolution to incrementally adjust the affordable housing fee that private developers pay
to the City for the production of affordable housing based on this methodology and that
the staff analysis was available for review in the City Clerk’s Office; and
WHEREAS, the City republished this notice on October 3, 2022; and
WHEREAS, a copy of staff’s analysis has been available in the City Clerk’s
Office for public review since September 26, 2022; and
WHEREAS, based on this analysis, an increase in the amount of $3.62 per
square foot of the current Affordable Housing Unit Base Fee of $35.50 for apartments
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Attachment A
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and an increase in the amount of $4.23 per square foot of the current Affordable
Housing Unit Base Fee of $41.47 for condominiums would be appropriate,
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:
SECTION 1. The current Affordable Housing Unit Base Fee for new market rate
condominiums of $41.47 per square foot established by Resolution No. 10149 (CCS),
Resolution No. 10229 (CCS), Resolution No. 10329 (CCS), Resolution No. 10422
(CCS), Resolution No. 10529 (CCS), Resolution No. 10578 (CCS), Resolution No.
10705 (CCS), Resolution No. 10763 (CCS), Resolution No. 10833 (CCS), Resolution
No. 10902 (CCS), Resolution No. 10985 (CCS), Resolution No. 11069 (CCS),
Resolution No. 11130 (CCS), Resolution No. 11191 (CCS), and Resolution No. 111356
(CCS) shall be increased by $4.23 per square foot of floor area.
SECTION 2. The current Affordable Housing Unit Base Fee for new market rate
apartment of $35.50 per square foot established by Resolution No. 10149 (CCS),
Resolution No. 10229 (CCS), Resolution No. 10329 (CCS), Resolution No. 10422
(CCS), Resolution No. 10529 (CCS), Resolution No. 10578 (CCS), Resolution No.
10705 (CCS), Resolution No. 10763 (CCS), Resolution No. 10833 (CCS), Resolution
No. 10902 (CCS), Resolution No. 10985 (CCS), Resolution No. 11069 (CCS),
Resolution No. 11130 (CCS), Resolution No. 11191, and Resolution No. 111356 (CCS)
shall be increased by $3.62 per square foot of floor area.
SECTION 3. Resolution No. 10149 (CCS), Resolution No. 10229 (CCS),
Resolution No. 10329 (CCS), Resolution No. 10422 (CCS), Resolution No. 10529
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Attachment A
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(CCS), Resolution No. 10578 (CCS), Resolution No. 10705 (CCS), Resolution No.
10763 (CCS), Resolution No. 10833 (CCS), Resolution No. 10902 (CCS), Resolution
No. 10985 (CCS), Resolution No. 11069 (CCS), Resolution No. 11130 (CCS),
Resolution No. 11191 (CCS), and Resolution No. 11356 (CCS) shall remain in full force
and effect and shall not be superseded or altered by this resolution in any way.
SECTION 4. The City Clerk shall certify to the adoption of this Resolution, and
thenceforth and thereafter the same shall be in full force and effect on December 1,
2022.
APPROVED AS TO FORM:
_________________________ City Attorney
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City Council Meeting: 10-25-2022 Santa Monica, California
RESOLUTION NUMBER _________ (CCS)
(City Council Series)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA AUTOMATICALLY ADJUSTING
THE AFFORDABLE HOUSING UNIT DEVELOPMENT COST PURSUANT
TO SANTA MONICA MUNICIPAL CODE SECTION 9.64.070(C) BASED ON CHANGES IN CONSTRUCTION COSTS AND LAND COSTS
WHEREAS, on June 13, 2006, the City Council amended Santa Monica
Municipal Code Section 9.56.070, now renumbered Section 9.64.070, to provide that
the City’s affordable housing unit development cost shall be established by resolution
and that commencing on July 1, 2007, the affordable housing unit development cost
shall be automatically adjusted annually by City Council based on changes in
construction costs and land costs; and
WHEREAS, Santa Monica Municipal Code Section 9.64.020 defines “affordable
housing unit development cost” as “the City’s average costs to develop a unit of housing
affordable to 30% income households, 50% income households, 80% income
households or moderate-income households;” and
WHEREAS, in order to implement the Council’s decision that the affordable
housing unit development cost be adjusted based on changes in land and construction
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costs, staff formulated a specific method of measuring changes in construction costs
and land costs; and
WHEREAS, this proposed methodology was detailed in an April 24, 2006 letter
prepared by Paul S. Silvern of HR&A Advisors, Inc. (“HR&A”) on behalf of the City and
approved by the Council on June 13, 2006; and
WHEREAS, pursuant to this methodology, on July 24, 2007, the City Council
adopted Resolution No. 10230 (CCS) which established an affordable housing unit
development cost of $265,632; and
WHEREAS, pursuant to this methodology, on July 23, 2008, the City Council
adopted Resolution No. 10330 (CCS) which incrementally adjusted this unit
development cost by $11,953; and
WHEREAS, pursuant to this methodology, on September 8, 2009, the City
Council adopted Resolution No. 10423 (CCS) which incrementally adjusted this unit
development cost by $7,217; and
WHEREAS, pursuant to this methodology, on September 28, 2010, the City
Council adopted Resolution No. 10530 (CCS) which incrementally decreased this unit
development cost by $3,702; and
WHEREAS, pursuant to this methodology, on June 14, 2011, the City Council
adopted Resolution No. 10579 (CCS) which incrementally adjusted this unit
development cost by $5,903; and
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WHEREAS, pursuant to this methodology, on September 11, 2012, the City
Council adopted Resolution No. 10706 (CCS) which incrementally adjusted this unit
development cost by $2,296; and
WHEREAS, pursuant to this methodology, on August 27, 2013, the City Council
adopted Resolution No. 10764 (CCS) which incrementally adjusted this unit
development cost by $2,314; and
WHEREAS, pursuant to this methodology, on August 26, 2014, the City Council
adopted Resolution No. 10834 (CCS) which incrementally adjusted this unit
development cost by $20,996; and
WHEREAS, pursuant to this methodology, on August 25, 2015, the City Council
adopted Resolution No. 10903 (CCS) which incrementally adjusted this unit
development cost by $15,318; and
WHEREAS, pursuant to this methodology, on August 23, 2016, the City Council
adopted Resolution No. 10986 (CCS) which incrementally adjusted this unit
development cost by $11,805;
WHEREAS, pursuant to this methodology, on August 8, 2017, the City Council
adopted Resolution No. 11070 (CCS) which incrementally adjusted this unit
development cost by $16,987; and
WHEREAS, pursuant to this methodology, on August 14, 2018, the City Council
adopted Resolution No. 11131 (CCS) which incrementally adjusted this unit
development cost by $17,836; and
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WHEREAS, pursuant to this methodology, on August 13, 2019, the City Council
adopted Resolution No. 11192 (CCS) which incrementally adjusted this unit
development cost by $8,240; and
WHEREAS, pursuant to this methodology, on August 24, 2021, the City Council
adopted Resolution No. 11357 (CCS) which incrementally decreased this unit
development cost by $10,335; and
WHEREAS, Resolution No. 10230 (CCS), Resolution No. 10330 (CCS),
Resolution No. 10423 (CCS), Resolution No. 10530 (CCS), Resolution No. 10579
(CCS), Resolution No. 10706 (CCS), Resolution No. 10764 (CCS), Resolution No.
10834 (CCS), Resolution No. 10903 (CCS), Resolution No. 10986 (CCS), Resolution
No. 11070 (CCS), Resolution No. 11131 (CCS), Resolution No. 11192 (CCS), and
Resolution No. 11357 (CCS) thereby established an affordable housing unit
development cost of $372,460; and
WHEREAS, in accordance with Santa Monica Municipal Code Section 9.64.070
and the City Council's approved methodology, staff has calculated the required
incremental adjustment to the unit development cost based on the changes to
construction costs and land costs that have occurred since the adjustment undertaken
last year; and
WHEREAS, on September 26, 2022, the City published a notice that at the
October 25, 2022 City Council meeting, the City Council would consider a proposed
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resolution to adjust the affordable housing unit development cost that private developers
may pay to the City for the production of affordable housing based on this methodology
and that the staff analysis was available for review in the City Clerks Office; and
WHEREAS, the City republished this notice on October 3, 2022; and
WHEREAS, a copy of staff’s analysis has been available in the City Clerk’s
Office for public review since September 26, 2022; and
WHEREAS, based on this analysis, an increase in the amount of $37,991 to the
current affordable housing development cost of $372,460 would be appropriate,
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:
SECTION 1. The current Affordable Housing Unit Development Cost of
$372,460 established by Resolution No. 10230 (CCS), Resolution No. 10330 (CCS),
Resolution No. 10423 (CCS), Resolution No. 10530 (CCS), Resolution No. 10579
(CCS), Resolution No. 10706 (CCS), Resolution No. 10764 (CCS), Resolution No.
10834 (CCS), Resolution No. 10903 (CCS), Resolution No. 10986 (CCS), Resolution
No. 11070 (CCS), Resolution No. 11131 (CCS), Resolution No. 11192 (CCS), and
Resolution No. 11357 (CCS) shall be increased by $37,991.
SECTION 2. Resolution No. 10230 (CCS), Resolution No. 10330 (CCS),
Resolution No. 10423 (CCS), Resolution No. 10530 (CCS), Resolution No. 10579
(CCS), Resolution No. 10706 (CCS), Resolution No. 10764 (CCS), Resolution No.
10834 (CCS), Resolution No. 10903 (CCS), Resolution No. 10986 (CCS), Resolution
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No. 11070 (CCS), Resolution No. 11131 (CCS), Resolution No. 11192 (CCS), and
Resolution No. 11357 (CCS) shall remain in full force and effect and shall not be
superseded or altered by this resolution in any way.
SECTION 3. The City Clerk shall certify to the adoption of this Resolution, and
thenceforth and thereafter the same shall be in full force and effect on December 1,
2022.
APPROVED AS TO FORM:
_________________________ City Attorney
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Administrative Guidelines
Affordable Housing Production Program
AFFORDABLE HOUSING PRODUCTION PROGRAM
ADMINISTRATIVE GUIDELINES
CITY OF SANTA MONICA
(Pursuant to Chapter 9.64 of the Municipal Code)
Prepared by
The City of Santa Monica Housing Division
Approved by City Council April 12, 2016
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Administrative Guidelines
Affordable Housing Production Program
i
Table of Contents
1. Introduction ................................................................................................................ 1
2. Fee Methodology........................................................................................................ 2
A. Establishment and Periodic Adjustment of Base Fee ............................................. 2
B. Affordable Housing Unit Development Cost ........................................................... 3
3. On-Site Affordable Residence Option ........................................................................ 4
4. Off-Site Affordable Residence Option ........................................................................ 4
A. One-Quarter Mile Radius Maximum ....................................................................... 5
B. Exceptions to the One-Quarter Mile Radius Maximum ........................................... 5
C. Evidence of Site Control ......................................................................................... 6
D. Simultaneous Development of Off-Site Affordable Residences ............................. 7
5. Land Acquisition Option ............................................................................................. 7
A. Eligible Land Parcels .............................................................................................. 7
B. Evidence of Site Control ....................................................................................... 10
C. Conveyance of the Site ........................................................................................ 10
D. Simultaneous Conveyance of Land or Option ...................................................... 12
E. Eligible Non-Profit Affordable Housing Developer ................................................ 12
6. For-Sale Affordable Residence Requirements ......................................................... 13
A. Establishment of the Initial Sales Price ................................................................ 13
B. Re-Sale of an Affordable Residence to a Subsequent Purchaser ........................ 15
C. Subordination ………. .......................................................................................... 16
D. Default and Foreclosure ....................................................................................... 16
E. Distribution of Insurance and Condemnation Proceeds ....................................... 16
7. Tenant and Purchaser Eligibility Procedures ............................................................ 17
A. Priority Households .............................................................................................. 17
B. Persons Ineligible to Occupy an Affordable Residence ........................................ 18
C. Establishment, Maintenance, and Update of Income-Qualified Tenants and
Purchasers List .................................................................................................... 20
D. Tenant Income Increases, Initial Ineligibility and Advance Notice to City............. 25
8. Adjustments or Waivers ........................................................................................... 28
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Administrative Guidelines
Affordable Housing Production Program
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ATTACHMENTS
1-A Municipal Code Section 9.64 – Affordable Housing Production Program
1-B AHPP Options Comparison Table
2-A Fee Adjustment Methodology
2-B Current Base Fees for Apartment and Condominium Projects
3-A Affordable Residences Table - Condominium Projects w/4+ Residences in
Multifamily Zones
3-B Incentives Table – Affordable Housing Developers
3-C Extremely-Low, Very-Low, Low and Moderate Income Levels
3-D Maximum Allowable Rents
3-E Deed Restriction Sample
4-A Affordable Housing Eligibility List Sample Application
4-B Waiting List Referral Form Sample
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Administrative Guidelines
Affordable Housing Production Program
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1. Introduction
These Administrative Guidelines provide guidance on the implementation of the City’s
Affordable Housing Production Program, Chapter 9.64 of the Santa Monica Municipal
Code (“AHPP”) (see Attachment 1-A for a complete copy of the AHPP). The AHPP was
originally adopted by the City Council on July 21, 1998. It has been amended on several
occasions since then. The AHPP gives developers of multi-family housing a variety of
options for satisfying the City’s affordable housing requirements. The precise options
vary depending on the housing type and location of the housing being produced.
All new multi-family housing developments of two or more residences, including multi-
family housing that is part of commercial or other developments, must comply with
Chapter 9.64 unless specifically exempted by the terms of Chapter 9.64. See Attachment
1-B for a comparison table on the various options for complying with Chapter 9.64. The
AHPP implements Proposition R. Approved by Santa Monica voters in November, 1990,
Proposition R requires that not less than 30 percent of all newly constructed multi-family
residential housing in the City each year be permanently affordable to, and occupied by,
low- and moderate-income households.
Section 2 of these Guidelines describes the Fee Methodology. Section 3 provides
information about the number of affordable residences required and the development
incentives associated with the On-Site Option. The remaining sections expand upon the
AHPP and provide additional requirements regarding the Off-Site Option (Section 4), the
Land Dedication Option (Section 5), For-Sale Affordable Residences (Section 6), the
Tenant and Purchaser Eligibility Procedures (Section 7) and Adjustments or
Waivers (Section 8).
Questions about how a particular multifamily project applicant shall satisfy the affordable
housing obligation (pay a fee, build residences onsite or offsite, or provide land
dedications) should be directed to either the City Planning Division at (310) 458-8341, or
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to the Planning Counter in Room 111 in City Hall. Questions about current maximum
rents and sales price calculation, or Tenant Eligibility and Selection Procedures should
be directed to staff in the Housing Division at (310) 458-8702.
2. Fee Methodology
One way to satisfy the affordable housing obligation is through payment of the Affordable
Housing Unit Base Fee (§ 9.64.070). The amount of the Affordable Housing Unit Base
Fee ("Base Fee") is based upon the floor area of the project. The floor area of the project,
as defined in the Municipal Code § 9.04.02.030.315, is multiplied by the Base Fee in order
to determine the total fee owed by each project. The proceeds from this Base Fee are
deposited into a special City Trust Fund and used to facilitate the development of housing
affordable to very low-income, low-income and moderate-income households. The Fee
Option is not available for ownership projects of four or more residences in the City’s
multi-family residential zones.
A. Establishment and Periodic Adjustment of Base Fee
The Base Fee is set by a Resolution of the City Council (See Municipal Code 9.64.070
(b)) and is subject to annual adjustment based on changes in land cost and construction
cost. The methodology for making these annual adjustments was established by the City
Council in June 2006. More specifically, construction cost inflation is established based
on the Engineering News Record’s (ENR) Construction Cost Index, which is updated
monthly and is readily available via the Internet. The methodology uses annual change
in median condominium purchase prices as a proxy measure for land cost changes. The
relative balance between land cost inflation (based on changes in median condo prices)
and construction cost inflation (based on a construction cost index) is determined based
on current development cost data for recently completed or construction-in-progress
multi-family affordable developments assisted by the City. A detailed explanation of the
annual adjustment methodology is provided in Attachment 2-A.
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There are different base fees for condominiums and apartment projects. Attachment 2-
B contains the current Base Fee amounts for apartment and condominium projects.
B. Affordable Housing Unit Development Cost
The Affordable Housing Unit Development Cost is set by a Resolution of the City Council
(See Municipal Code 9.64.070(C)) and is subject to annual adjustment based on changes
in land cost and construction cost. The methodology for making these annual
adjustments was established by the City Council in June 2006 and is the same
methodology used in adjusting the Affordable Housing Unit Base Fee described in
Section (3)(A). The Affordable Housing Unit Development Cost is the average cost to the
City to develop a residence of housing affordable to low- and moderate-income
households. The Affordable Housing Production Program provides that when developers
of market rate multi-family housing are providing affordable residences on- or off-site, and
the calculation of the number of affordable residences required results in a fractional
residence, these developers are eligible to pay a fee equal to the cost of producing that
fractional residence based on the Affordable Housing Unit Development Cost if that
fraction is less than 0.75. See Attachment 2-A.
Example (6-residence condominium project)
6 X .20 = 1.2 affordable housing residences
1 residence would be constructed on-site
Fee payment of 0.2 X $327,927 = $65,585.40
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3. On-Site Affordable Residence Option
Another way to satisfy the affordable housing requirements of Chapter §9.64 is by
constructing affordable residences on the same site as the proposed new multi-family
project (See § 9.64.050). Ownership projects or 4 or more residences in multifamily zones
must provide affordable residences either onsite or offsite (See § 9.64.040). All housing
developments that provide onsite affordable residences in accordance with the AHPP are
entitled to a bonus over the maximum allowable number of residences on the site (i.e.,
density bonus) or a development bonus (commercial/industrial zones) and incentives
(See Section 9.64.050[I] and Section 9.22). This includes all residences for sale or rent
such as:
• Substantial remodel and conversion of commercial buildings to residential
residences
• Substantial remodel of residential buildings
• Condos and apartments
Attachment 3-A provides a table indicating the minimum number of affordable residences
required in an ownership project in a multifamily zone and the fractional portion of a
residence that may be paid as a fee. Attachment 3-B provides information on density
bonus and other development incentives allowed when providing onsite affordable
residences. Attachments 3-C and 3-D provide information on the most current income
eligibility and rent limits. Attachment 3-E provides an example of an “Agreement Imposing
Restrictions on Real Property” between the City and a developer regarding a project
containing affordable housing residences.
4. Off-Site Affordable Residence Option
This section of the Guidelines specifies certain additional requirements concerning the
location of the Off-Site Affordable Residences, site control, and concurrent development
of the market-rate project and the off-site residences.
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A. One-Quarter Mile Radius Maximum
Except as provided below, the alternative site for the Off-Site Affordable Residences shall
be located within a one-quarter mile radius of the parcel on which the market rate
residences are proposed, and within the boundaries of the City. (SMMC § 9.64.060(C))
The outer limit of this one-quarter mile radius area shall be determined by the Planning
and Community Development Department. The Department’s method for so doing shall
be similar to the method used for determining the area within which written notice of a
pending development permit is given. Specifically, on a map of City parcels, the project
applicant shall submit as part of the project application a set of one-quarter mile radii from
the corners of the parcel on which the market rate residences will be constructed. Any
multi-family parcel or commercial parcel on which multi-family housing is a permitted use,
located, in whole or in any part, within these intersecting one-quarter mile radii is an
eligible parcel for development of Off-Site Affordable Residences.
B. Exceptions to the One-Quarter Mile Radius Maximum
The maximum one-quarter mile radius requirement may be waived by majority vote of the
City Planning Commission (whose decision shall be appealable to the City Council),
based upon substantial evidence demonstrating that the location of Off-Site Affordable
Residences more than one-quarter mile from the site of the market rate residences, but
still within the City limits, better accomplishes the goals of the City’s zoning and planning
regulations, including maximizing affordable housing production and dispersing
affordable housing throughout the City. (SMMC § 9.64.060(F))
The project applicant shall have the burden of demonstrating why a location for the Off-
Site Affordable Residences of more than one-quarter mile from the market rate
residences better accomplishes the City’s affordable housing objectives. In making its
determination, the Planning Commission shall consider the recommendations of the
Planning Director and the Housing Manager on the petition. An application for an
exception to the one-quarter mile radius shall be submitted as part of the planning
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application for any other discretionary approvals on the project that are within the purview
of the Planning Commission.
By way of example, but not by limitation, factors that may justify the special exception
include:
• No Available Sites. There are no multi-family or suitably zoned non-residential
parcels within the strict boundaries of the one-quarter mile radius that can
accommodate the required number of Affordable Off-Site Residences.
• Dispersal of Affordable Residences. The alternative location makes it possible to
locate Off-Site Affordable Residences throughout the City.
• More Affordable Residences. The size, price or other characteristics of the
alternative site results in a project that yields more affordable residences than the
project would yield if it were located within the strict limits of the one-quarter mile
radius.
• Deeper Level of Affordability. The size, price or other characteristics of the
alternative location makes it possible to offer the Off-Site Affordable Residences
to households at a lower household income level than would be possible within the
strict limits of the one-quarter mile radius.
In no event, however, shall the Off-Site Affordable Residences be located outside a radius
of one mile from the market rate residences. No more than five project exceptions to the
one-quarter mile radius shall be approved in any one City fiscal year.
C. Evidence of Site Control
In order to exercise the Off-Site Affordable Residence Option, the applicant must provide
evidence that the site is owned in fee or that an option to purchase, subject to City project
approval, has been secured. (SMMC § 9.64.060(B)) Evidence of such site control (e.g.,
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copies of purchase or option agreements) shall be provided to the City as part of the
project application package.
D. Simultaneous Development of Off-Site Affordable Residences
All affordable housing residences in a multi-family project or a phase of a multi-family
project shall be constructed concurrently with the construction of market rate residences
in the multi-family project or phase of that project. No building permit for the market rate
residences shall be issued until a building permit has been issued for the Off-Site
Affordable Residences, and no final City construction permit sign-off or occupancy permit
shall be granted for the market rate residences until final construction permit sign-off or
occupancy permit has been granted for the Off-Site Affordable Residences. Off-Site
Affordable Residences shall be offered for rent or sale, as applicable, prior to or
concurrently with rental or sale of the market rate residences.
5. Land Acquisition Option
This section of the Guidelines specifies additional requirements for exercising the Land
Acquisition Option.
A. Eligible Land Parcels
Only land parcels meeting the following minimum characteristics shall be eligible under
the Land Acquisition Option:
1. Zoning
Land parcels eligible for conveyance to the City, or an eligible non-profit affordable
housing developer, shall be located in a City multi-family housing, commercial or
industrial district in which multi-family housing is a permitted use.
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2. Minimum Land Value
For sites dedicated to the City, or an eligible non-profit affordable housing
developer, the fair market value of the parcel(s) shall be at least equal to the
amount of the Affordable Housing Production Fee that would otherwise apply were
the market rate project applicant to elect that option under Chapter 9.64 instead of
the Land Acquisition Option. The fair market value of the parcels proposed under
this Option shall be supported by an estimate of value prepared by a qualified real
estate appraiser, subject to the City’s reasonable review of the appraisal. For
situations involving option payments, rather than conveyance of land in fee, see
below. For below market rate sales, or option transfers, see below.
3. Site Characteristics
The parcel shall satisfy the following minimum criteria:
- 6,000 square feet
- Can be developed with at least 4 dwelling units
- Free of characteristics that would make it difficult or impossible to develop
in a timely manner (i.e., irregular shape, excessive sloping, soil or other
contamination, adjacent to incompatible land use)
A Phase I environmental evaluation report shall be required before any parcel can
be considered for conveyance.
4. One-Quarter Mile Radius Maximum
Except as provided below, the land parcel(s) proposed to be conveyed to the City,
or an eligible non-profit affordable housing developer, shall be located within a one-
quarter mile radius of the parcel on which the market rate residences are proposed
and within the City limits. (SMMC § 9.64.080) The outer limits of this one-quarter
mile radius area shall be determined by the Planning and Community Development
Department. The Department’s method for so doing shall be similar to the method
used for determining the area within which written notice of a pending development
permit is given. Specifically, on a map of City parcels, the project applicant shall
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draw a set of one-quarter mile radii from the corners of the parcel on which the
market rate residences will be constructed. Any multi-family parcels located, in
whole or in any part, within these intersecting one-quarter mile radii is an eligible
parcel for the Land Acquisition option.
5. Exceptions to the One-Quarter Mile Radius Maximum
The maximum one-quarter mile radius requirement may be waived by majority vote
of the City Planning Commission (whose decision shall be appealable to the City
Council), based upon substantial evidence demonstrating that the location of land
more than one-quarter mile from the site of the market rate residences better
accomplishes the goals of the City’s zoning and planning regulations, including
maximizing affordable housing production and dispersing affordable housing
throughout the City. (SMMC § 9.64.080)
The project applicant shall have the burden of demonstrating why a proposed site more
than one-quarter mile from the market rate residences (but still within the City limits) better
accomplishes the City’s affordable housing objectives. In making its determination, the
Planning Commission shall consider the recommendations of the Planning Director, the
Housing Manager, and the Housing Commission. An application for an exception to the
one-quarter mile radius shall be processed simultaneously with any other discretionary
approvals on the project that are within the purview of the Planning Commission.
By way of example, but not by limitation, factors that may justify the special exception
include:
No Available Sites. There are no multi-family parcels within the strict boundaries
of the one-quarter mile radius that are suitable for multi-family development.
Dispersal of Affordable Residences. The alternative location makes it possible to
locate affordable housing throughout the City.
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More Affordable Residences. The size, price or other characteristics of the
alternative site could result in an affordable housing project that yields more
affordable residences than would otherwise be required under the On-Site
Affordable Residences option or the Off-Site Affordable Residences option in
Ordinance 1918.
Deeper Level of Affordability. The size, price or other characteristics of the
alternative location makes it possible to offer affordable residences to households
at a lower household income level than would be possible within the strict limits of
the one-quarter mile radius.
In no event, however, shall the Land Acquisition Option apply to a site located outside a
radius of one mile from the market rate residences. No more than five project exceptions
to the one-quarter mile radius maximum shall be approved in any one City fiscal year.
B. Evidence of Site Control
In order to exercise the Land Acquisition Option, the market rate multi-family project
applicant shall provide evidence, subject to reasonable City approval, that the site to be
conveyed to the City, or an eligible non-profit affordable housing developer, is owned in
fee by the applicant, or that an option to purchase has been secured. Evidence of such
site control, including a current title report, and a copy of the option or lease agreement,
if applicable, shall be included as part of the application for the market rate project.
C. Conveyance of the Site
An eligible site, or option to purchase an eligible site, shall be conveyed to the City, or an
eligible non-profit affordable housing developer, as follows:
1. Fee Title Transfer
The site shall be sold or dedicated to the City or to a qualified non-profit housing
developer free of any encumbrances, contractual, physical or financial, that would
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prevent it from being developed in a timely way by the City, or a qualified non-profit
housing developer, for affordable multi-family housing.
If the site is dedicated to the City, or to an eligible non-profit affordable housing
developer at no cost, the City shall provide reasonable cooperation as may be
requested to help the applicant secure any state or federal tax credit for which such
a dedication may be eligible.
If the site is sold to the City, or to an eligible non-profit affordable housing developer
at below market rate, the difference between the fair market value and the below
market sale price must be at least equal to the amount of the Affordable Housing
Production Fee otherwise due, if that option had been selected by the project
applicant.
2. Option to Purchase
If the market rate project applicant secures an option for another site to fulfill the
Land Acquisition Option, the option must have a minimum term of six months and
clearly state that the option may be transferred to a third party, such as the City or
a qualified non-profit housing developer, under the same terms and conditions,
including the agreed upon purchase price. A copy of the option agreement and a
current title report shall be included with the application for the market rate project.
Any costs incurred by applicant to maintain the option from the date of project
application through successful transfer of the option to the City or to a qualified
non-profit developer shall be the responsibility of the applicant. If the sum of the
applicant’s out-of-pocket option-related expenses, from date of project application
through conveyance of the option, is less than the amount of the Affordable
Housing Production Fee Option, these costs will be treated as a credit against the
Affordable Housing Production Fee that would otherwise be due the City under
that Chapter 9.64 option. The applicant shall pay any difference to the City as a
reduced Affordable Housing Production Fee. The applicant shall provide the City
a full accounting of all option payments and out-of-pocket option-related costs
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eligible for offset against the Affordable Housing Production Fee amount, which
accounting shall be subject to reasonable City review and approval.
The land offered for option must have the following minimum site characteristics:
- 6,000 square feet
- Can be developed with at least 4 dwelling units
- Free of characteristics that would make it difficult or impossible to develop
(i.e., irregular shape, excessive sloping, soil or other contamination,
adjacent to incompatible land use)
A Phase I environmental evaluation report shall be required before any parcel can
be considered for option.
The City shall exercise reasonable discretion in considering the option. The land
option must be consistent with all City funding requirements, including the
Consolidated Rental Housing Trust Fund Guidelines.
D. Simultaneous Conveyance of Land or Option
Conveyance of land or an option to purchase land to the City or an eligible non-profit
affordable housing developer, pursuant to Chapter 9.64, shall be completed prior to the
City’s final sign-off on construction permits for the market rate residences, or issuance of
a certificate of occupancy, whichever occurs first.
E. Eligible Non-Profit Affordable Housing Developer
Dedication of land, below market rate sale of land or transfer of an option to purchase
may be made either to the City or an “eligible non-profit affordable housing developer.”
For purposes of the Land Acquisition Option of Chapter 9.64, an eligible not-profit
affordable housing developer is a private, non-profit corporation with: (1) a current
exemption under Section 501(c)(3) of the U.S. Internal Revenue Code; (2) a certificate of
good standing from the Secretary of State in which the organization is incorporated; (3)
has the development of housing affordable to low-income households as one of its
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principle missions; and (4) has been approved by the City Housing Manager, based on
reasonable review of the organization’s record of performance developing multi-family
housing affordable to low-income households. The non-profit affordable housing
developer intended as the recipient of land pursuant the Land Acquisition Option must be
identified as part of the project application.
6. For-Sale Affordable Residence Requirements
In the event that the affordable residences required under either the On-Site Affordable
Residence Option or the Off-Site Affordable Residence Option are intended to be for-sale
residences, rather than rentals, the following rules shall apply.
A. Establishment of the Initial Sales Price
The developer shall establish the initial sales price for the affordable residence so that
the Total Monthly Housing Costs for the purchaser do not exceed the following formula:
Area Median Income x 110% x Bedroom Adjustment x 35% / 12. Total Housing Cost
includes mortgage principal and interest, property taxes, property insurance,
homeowners’ association dues and mortgage insurance, if applicable
Area Median Income is defined in SMMC Section 9.64.020(K) and determined
periodically by the United States Department of Housing and Urban Development for the
Los Angeles area.
The Bedroom Adjustment Factors are:
0 Bedroom 0.7 3 Bedrooms 1.0
1 Bedroom 0.8 4 Bedrooms 1.08
2 Bedrooms 0.9
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The conventional financing shall conform to all of the following terms:
Loan Term: 30 Years
Interest Rate: Fixed
Minimum Down payment: 5%
Maximum Front End Debt-to-Income Ratio1: 38%
Maximum Back End Debt-to-Income Ratio2: 41%
The buyer must be income-qualified pursuant to Santa Monica Municipal Code Chapter
9.64 and this Agreement.
The actual price of the affordable residence will be a combination of the bank loan amount
a buyer qualifies for plus the down payment provided by the buyer (consistent with the
total monthly housing costs and the financing terms listed above). The lending criteria
used by the private lender must be reasonable and customary and shall be subject to
review and approval by the City Housing Division prior to completion of the purchase
transaction. Moreover, any purchase price for an affordable residence underwritten with
a back-end ratio of more than 41 percent (the maximum generally required by the
secondary mortgage market) will also require review and reasonable approval by the City
prior to completion of the purchase transaction.
1. Front End Ratio: ratio of total monthly housing costs (including mortgage principal and interest,
property taxes, property insurance, homeowners’ association dues and mortgage insurance, if applicable)
to total gross household income.
2. Back End Ratio: ratio of total monthly housing costs (including mortgage principal and interest, property
taxes, property insurance, homeowners’ association dues and mortgage insurance, if applicable) plus
other monthly payments on long-term household debt to gross household income.
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B. Re-Sale of an Affordable Residence to a Subsequent Purchaser
1. First Right of Refusal to the City
Throughout the 55-year period of the Agreement Imposing Restrictions on Real
Property, the City shall have the first opportunity to purchase affordable for-sale
residences created pursuant to the On-Site Affordable Residence Option or the
Off-Site Affordable Residence Option (“Option to Purchase”). Owners wishing to
sell their residences shall notify the City in writing at least 60 days before the
residence is offered for sale to another qualifying party. The seller shall ensure
that the residence is clean, in good repair and is available to be shown to
prospective buyers. Any Option-related time periods in favor of the City shall be
tolled until these conditions are met to the City’s reasonable satisfaction.
The City shall have 60 days to notify the seller of its intent to exercise the Option
to Purchase, either by City purchase, by its designee (e.g., a non-profit affordable
housing developer), or by referral of a qualified moderate-income buyer. (See
below for the method for calculating the subsequent purchase price.)
In the event that the City does not exercise the Option to Purchase, or an offer to
purchase by the City or a qualified buyer is not accepted by the seller, the Option
shall terminate and the owner may sell the residence to any income qualifying
buyer at a price consistent with Section 6(B)(2) of these Guidelines. Seller shall
only accept an offer by an income qualified buyer at a price consistent with Section
6(B)(2) of these Guidelines. Closing costs shall be divided between seller and
buyer as is customary for like real estate transactions in Santa Monica at the time
that escrow is opened.
2. Maximum Subsequent Selling Price
The resale price restriction will provide that the price for resale of the affordable
residence shall be calculated using the same formula and factors set forth in
Section 6(A).
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3. Continuous Use as a Primary Residence
Each purchaser of an affordable residence shall certify, prior to the close of
escrow, in a form acceptable to the City that the residence is being purchased and
shall be maintained as the purchaser’s primary residence. Failure of the purchaser
to maintain eligibility for a homeowner’s exemption from property tax shall be
construed as evidence that the residence is not the primary residence of the
purchaser.
C. Subordination
At the request of the qualifying household’s lender, the City may subordinate the
foregoing income eligibility and resale price restrictions to a first Deed of Trust at the time
of purchase, provided that the Deed of Trust does not exceed the purchase price of the
residence.
D. Default and Foreclosure
A Request for Notice of Default shall be recorded along with the Agreement Imposing
Restrictions on Real Property. The Agreement will provide that any Notice of Default will
constitute an owner’s Notice of Intent to Sell, and that the City may exercise its Option to
Purchase. In the event that the City does not exercise its Option and the residence is
foreclosed upon, proceeds of the foreclosure sale shall be used first to satisfy the lender’s
lien(s), and any surplus proceeds, up to the amount that the owner would have received
had there been no foreclosure, shall be paid to the owner. The remaining balance of any
surplus shall be paid to the City for deposit into the Citywide Affordable Housing Trust
Fund.
E. Distribution of Insurance and Condemnation Proceeds
In the event that the residence is destroyed and insurance proceeds are distributed to the
low-income household owner instead of being used to rebuild, or in the event of liquidation
of the homeowners’ association and distribution of the assets of the association to the
members, including the owner, any surplus remaining after payment of encumbrances
shall be distributed as set forth above with respect to default and foreclosure.
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7. Tenant and Purchaser Eligibility Procedures
Per Chapter 9.64, multi-family project applicants who have opted to satisfy the affordable
housing obligation through the on-site or off-site option are required to fill vacant
affordable residences by selecting income-eligible tenants from a City-developed list of
income-qualified households, except if there are no qualified households on the City-
developed list or if the project applicant is developing ownership projects of four or more
residences in the City's multi-family residential zones. Under these exceptions, the project
applicant may choose themselves to select income-qualified households which shall be
subject to eligibility certification by the City.
This section establishes priorities for eligibility to occupy On-Site Affordable Residences,
describes categories of persons ineligible to occupy On-Site Affordable Residences, and
outlines the procedures whereby the City Housing Division shall establish, maintain, and
update the list of eligible tenants.
A. Priority Households
In establishing the list of households eligible to occupy affordable residences, the Housing
Division shall adhere to the following priorities:
1) First Priority
Persons who have been permanently displaced or face permanent
displacement from their housing residences in Santa Monica as a result of
any of the following:
a) Ellis Act, owner-occupancy, or removal permit eviction
b) Earthquake, fire, flood, or other natural disaster
c) Funding reductions in Santa Monica housing voucher assistance
programs
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d) Governmental Action, such as Code enforcement
e) Closure of a mobile home park
2) Second Priority
Persons who are:
a) Residents of Santa Monica
b) Working in Santa Monica at least 36 hours per week
B. Persons Ineligible to Occupy an Affordable Residence
Section 9.64 of the Municipal Code (see § 9.64.110(B)) specifically disqualifies the
following categories of persons from occupying Affordable Residences:
- All employees and officials of the City or its agencies, authorities, or commis-
sions who have, by virtue of their position, policy-making authority or influence over
the implementation of the Affordable Housing Production Program, as well as the
immediate relatives of employees of such City employees and officials.
- The immediate relatives of the applicant or owner, including a spouse, child,
parent, grandparent, brother, sister, father-in-law, mother-in-law, son-in-law,
daughter-in-law, aunt, uncle, niece, nephew, sister-in-law, and brother-in-law.
Other parties disqualified from occupying affordable residences include:
- Tenants for whom the affordable residence will not be their sole residence.
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- Employees of the owner or the owner’s agents, including but not limited to
employees of the property management company, except as required by law. An
example of an exception would be a 100 percent affordable building that is required
by law to provide onsite management, and must therefore use an affordable
residence.
- Employees of any corporation or other entities where the owner has more than
a 10 percent equity, participation, revenue, or ownership interest.
- Immediate relatives, including a spouse, child, parent, grandparent, brother,
sister, father-in-law, mother-in-law, son-in-law, daughter-in-law, aunt, uncle, niece,
nephew, sister-in-law, and brother-in-law, of any other individual or entity with a
financial interest in the property.
- Households where all adults are full-time students unless all members of the
household meet all of the following criteria:
- Twenty-four years of age or older,
- Have lived separate from their parents for at least one year,
- Are not claimed as a dependent pursuant to IRS regulations on
any tax return for the most recent tax year, and
- The head of household provides written certification of all outside
financial assistance.
- and at least one member of the household meets one of the following
criteria:
- A veteran or active duty member of the U.S. military,
- Have one or more legal dependents other than a spouse,
- Live with a recognized disability,
- Be a graduate or professional student,
- Be married, or
- Have been an orphan or ward of the court through age 18.
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C. Establishment, Maintenance, and Update of Income-Qualified Tenants and
Purchasers List
The Santa Monica Housing Division shall be responsible for preparing and
maintaining an Eligibility List for this program and shall follow these Guidelines for
preparing, maintaining, and updating the Eligibility List. Subject to the
requirements below, the establishment, maintenance and update of the Eligibility
List shall be generally modeled after the Housing Authority Administrative Plan
with the Housing Division retaining the authority to adjust these protocols as
appropriate for this local program.
1) Public Noticing Procedures
To create the Eligibility List, the Housing Division shall publish notices in
newspapers circulated widely in Santa Monica, including newspapers that
reach minority communities, at a minimum. At least one notice shall be
published in a Spanish-language newspaper of general circulation. Examples
of appropriate newspapers include the Santa Monica Daily Press, L.A. Times,
La Opinion, and The Sentinel. The notices should briefly explain what
affordable housing is, state the applicable income requirements, indicate how
to apply for the Eligibility List, state when the application period opens and
closes, indicate priorities for eligible occupants, and provide a telephone
number for questions.
Applications may require name, address, telephone number, household size,
income, date of birth, information relevant to program priorities, and applicant’s
signature.
2) Creating the Eligibility List
The Housing Division shall create an Eligibility List using the information
provided on the applications received, including name, household size,
income, age, residency, place of employment (if applicable), priority status, and
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any other relevant information. Additionally, the Eligibility List will include
households on any existing waiting list who indicated their intent to be included
in the Eligibility List after being contacted by the Housing Division. Households
will be drawn from the Eligibility List as affordable residences become available
or in anticipation of affordable residences becoming available in the near future
and shall be income qualified for use in referrals for available affordable
residences.
3) Eligibility List and Referral Process
Each time affordable residences become available for occupancy, the owner
and the Housing Division shall follow these procedures:
a) At least 90 days prior to issuance of a Certificate of Occupancy by the City
for newly developed residences, or within 5 business days of notice of
tenant vacation in existing developments, owners shall notify the City of the
number and type (affordability level, number of bedrooms, ownership or
rental) of residences available.
b) Within 20 business days of notice by the owner, the City shall provide the
owner with a Referral Form, for each household drawn from the Eligibility
List, and provide at least five names for each residence available.
Additional names may be provided to the owner upon request, subject to
availability.
c) Owners shall directly contact the persons on the Referral Forms provided
by the City. Owners shall give applicants at least 5 business days to submit
a completed application. Owners who are not able to fill vacant residences
from the Referral Forms provided may request additional names from the
City. Additional names will be provided within 5 business days, subject to
availability.
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d) Owners shall conduct all further screening and selection of applicants. All
applicable State Fair Housing laws must be observed.
e) Candidates on the City’s Eligibility List may be referred up to a maximum of
five times, except in cases involving a reasonable accommodation. After
the fifth referral, candidate names will be removed from the Eligibility List.
4) Updating the Eligibility List
a) Periodic Update: The Eligibility List shall be periodically updated at least
every two years. Letters shall be sent to all households on the Eligibility List
requesting verification of all information, including name, address, place of
residency, place of employment (if applicable), and continued interest in
staying on the list. Eligibility List households shall be given two weeks to
respond. At the end of the two week period, the names of households who
have failed to respond shall be taken off the Eligibility List. The Eligibility
List shall also be updated to incorporate any changes in status (place of
residency, eligibility for priority status, etc.) for each applicant.
b) Emergency Additions to Eligibility List: At any time, even if the Eligibility List
is closed, persons displaced from Santa Monica housing as set forth in
Section 7(A)(1) of these Guidelines (i.e., “first-priority” households) will
result in the automatic addition of that household to the Eligibility List with
the applicable priority.
c) The City will provide a Referral Form to the owner for each household
selected from the Eligibility List. The owner shall complete the Referral
Form indicating whether a residence was offered to the household and
whether the residence was accepted or refused. A sample Referral Form
is provided in Attachment 4-B. If a residence was not offered because of a
poor credit history or for any other reason, the owner will note this as well.
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The City will incorporate this information into the Eligibility List, but not
disclose such information to other owners.
d) Households on the City’s Eligibility List will be referred only for those
residences for which they qualify. For example, moderate income
households will only be referred for vacancies in moderate income
residences. Households on the City’s Eligibility List must report any
changes to address, household size, Santa Monica residency, employment
in Santa Monica, and/or, income to the Housing Division within 10 days of
the change.
5) Persons Dependent Upon Income from Other Sources
Households on the City’s Eligibility List must report income from all sources.
Any households on the City’s Eligibility List receiving support, including tuition
payments, rent payments, and/or, regular gifts, and/or any household who
appears as a dependent upon the tax return of another individual must so
disclose. In these cases, the income of the other party will be considered along
with the income of the applicant/tenant household in determining eligibility.
6) Automatic Removal from Eligibility List
Applicant names will be removed immediately from the Eligibility List for:
a) Failure to appear for a scheduled qualification interview or prior to the
interview time contact the Housing Division to arrange an alternate time or
date, or
b) More than two refusals of offered residences, or
c) Misrepresentative statements on eligibility documentation, in qualification
interview(s), or Informal Review, or
d) Failure to disclose dependent status or receipt of substantial support, or
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e) Acceptance of an affordable residence stemming from a Referral.
Households whose names are removed from the Eligibility List will also have
their names removed from the Referral Form upon which their names appear.
Households whose names are removed from the Eligibility List shall be notified
by mail at the address which they have supplied to the City. The reason for
removal will be specified as part of the notification.
7) Appeal Process
a) Right to Appeal
The decision by the City to remove a name from the Eligibility List or from a
Referral Form may be appealed. All appeals must be in writing and
delivered to the Housing Division in person or by first class mail, by the close
of the business day, no later than 10 business days from the date of the
Housing Division’s notification of removal from the Eligibility List.
b) Scheduling an Informal Review
Upon receipt of an appeal in writing, the Housing Division shall conduct an
Informal Review. The Housing Division will schedule an Informal Review to
take place within 10 days of receipt of the appeal. Once the Informal Review
date is set, the appellant may reschedule only upon showing "good cause,"
which is defined as an unavoidable conflict seriously affecting the health,
safety or welfare of the Appellant or his/her family.
c) Failure of Appellant to Appear for Informal Review
If the appellant does not appear at a scheduled Informal Review and has
not rescheduled the Informal Review in advance, the appellant must contact
the Housing Division within two working days. The Housing Division shall
reschedule the Informal Review only if the appellant's absence was caused
by medical emergency or incarceration. In this event, the Informal Review
may be rescheduled only once.
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d) Conduct of the Informal Review
The informal review must be conducted by a person other than the one who
made or approved the decision under review, or a subordinate of this
person. The Appellant must be provided an opportunity to present written
or oral objections to the decision to remove them from the Eligibility List and
both the Appellant and the Housing Division have a right to present any
information pertinent to the issue of the Informal Review.
e) Notification of the Informal Review Decision
The Housing Division must notify the Appellant within 14 days of the
decision regarding the Informal Review, including an explanation of the
decision and the associated findings. This decision shall be final and not
subject to further administrative review.
D. Tenant Income Increases, Initial Ineligibility and Advance Notice to City
This subsection of the Guidelines provides protocols for changes in tenant income
during occupancy, property owner and tenant responsibilities when tenant was not
income eligible at the time of initial occupancy, and advance notice to the City
regarding rent increases.
1) Tenant Income Increases
The published Maximum Allowable Income applies to the household from the day
the tenant moves in through the first year of occupancy or the first annual
recertification, whichever comes first. If after the first year of occupancy in an
affordable apartment, or during the first annual recertification, the household
income is found to exceed the maximum allowable income limit for the apartment,
the tenant(s) may remain in the apartment as long as the household income does
not exceed 140 percent of the income limit for the residence.
However, if the tenant’s income exceeds 140 percent of the income limit for the
apartment, the following shall apply:
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a) If there is a vacant affordable apartment in the same building for which the
household qualifies, the household will be offered that apartment, providing
the move does not violate any other provisions of the law, including
minimum occupancy requirements. If the relevant “Agreement Imposing
Restrictions on Real Property” allows it, the property owner may also switch
the affordability levels of the two apartments to prevent the household from
having to move their belongings. The rent will then be adjusted to reflect
the higher level of affordability.
If the household refuses to move to the higher affordability level apartment
for which they qualify, or refuses to pay the higher rent, they will be provided
with a one-year notice to vacate the apartment.
If, before the term of the notice has passed, the tenant recertifies the
household income and they again qualify for the apartment, the one year
notice to vacate will be rescinded.
b) If the previous section does not apply, and there is a vacant market-rate
apartment of equal accommodations in the same building, the owner may
designate the market-rate apartment as the affordable apartment. The rent
in the formerly affordable apartment may then be raised to the market-rate
for the apartment. However, this option cannot be chosen if the relevant
“Agreement Imposing Restrictions on Real Property” specifically
enumerates which apartments in the building are designated as the
affordable apartments.
c) If neither of the two previous sections apply, the household will be provided
with a one-year notice to vacate the apartment.
i) If, before the term of the notice has passed, a market-rate apartment
becomes vacant in the same building, the tenant under notice to
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move will have first right of refusal to lease the market-rate
apartment.
ii) If, before the term of the notice has passed, the tenant recertifies the
household income and they again qualify for the apartment, the one-
year notice to vacate will be rescinded.
2) Initial Tenant Ineligibility
If during compliance monitoring by the City, or the property owner, it is determined
that the tenant’s income exceeded the income limit for the residence at the time
the tenant initially moved into the residence, the tenant shall be given a 90-day
notice to vacate the residence. Notwithstanding the above, if the tenant would
qualify for an affordable apartment targeted to a higher affordability level and such
a vacant residence is available within the subject property, then the tenant may be
allowed to move to that vacant residence, subject to Section 7(D)(3) below.
3) Property Owner to Pay for Relocation
When it is determined that a tenant’s income exceeded the income limit for an
affordable residence at initial occupancy, then it shall be the property owner’s
responsibility to pay the costs directly associated with relocating the tenant to
another residence within Santa Monica or adjacent area, unless the tenant
misrepresented pertinent information to obtain the residence. Such costs would
include packing/unpacking, moving/movers and utility connection fees, but would
not include the differential in rent between the affordable (AHPP) residence and
new residence.
4) Notice to City of Rent Increases
A property owner must provide a 30-day advanced written notice to the City before
issuing a rent increase notice to a tenant. The information provided in the property
owner’s notice to the City shall include the residence identification, tenant name,
affordability level of the residence (i.e., extremely low-, very low-, low- or moderate-
income) current rent, amenities included in rent (e.g., parking, water, trash),
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proposed rent, and proposed rent start date. The City will have 30-days upon
which to review the proposed rent increase and notify the property owner of any
objections before the property owner may issue a rent increase notice to a tenant.
In the absence of any other, more stringent, rent increase limitations on the
property, the rent of an affordable apartment shall not be increased by more than
five percent in any twelve month period, up to the published maximum allowable
rent.
8. Adjustments or Waivers
The AHPP authorizes a project applicant to request an adjustment or waiver of the AHPP
based on a showing that applying the requirements of this Chapter would effectuate an
unconstitutional taking of property or otherwise have an unconstitutional application to the
property.
To receive an adjustment or waiver, the applicant must submit an application to the
Director of Housing and Economic Development, or his/her designee, at the time the
applicant files a multi-family project application. The applicant bears the burden of
presenting substantial evidence to support the request and set forth in detail the factual
and legal basis for the claim, including all supporting technical documentation.
In making a determination on an application to adjust or waive the requirements of this
Chapter, the Director of Housing and Economic Development, or City Council on appeal,
may assume each of the following when applicable:
(1) The applicant is subject to the affordable housing requirement of this Chapter;
(2) The applicant will benefit from the inclusionary incentives set forth in this Chapter
and the City’s Municipal Code;
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(3) The applicant will be obligated to provide the most economical affordable housing
residences feasible in terms of construction, design, location and tenure.
The Director of Housing and Economic Development must make a written decision within
ninety days after a complete application is filed. The Director’s decision may be appealed
to the City Council if such appeal is filed within fourteen consecutive calendar days from
the date of the decision.
If the Director of Housing and Economic Development, or City Council responding to an
appeal of the Director’s decision, determines that applying the requirements of this
Chapter would effectuate an unconstitutional taking of property or otherwise have an
unconstitutional application to the property, the affordable housing requirements shall be
adjusted or waived to reduce the obligations under this Chapter to the extent necessary
to avoid an unconstitutional result. If an adjustment or waiver is granted, any change in
the use within the project shall invalidate the adjustment or waiver. If the Director, or City
Council on appeal, determines that no violation of the United States or California
Constitutions would occur through the application of this Chapter, the requirements of this
Chapter shall remain fully applicable.
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ATTACHMENTS
1-A Municipal Code Chapter 9.64 (Subject to Amendments)
1-B AHPP Options Comparison Table
2-A Fee Adjustment Methodology
2-B Current Base Fees for Apartment and Condominium Projects (Adjusted Annually)
3-A Affordable Residences Table - Condominium Projects w/4+ Residences in
Multifamily Zones
3-B Development Incentives Table
3-C Very Low, Low and Moderate Income Levels (Adjusted Annually)
3-D Maximum Rents (Adjusted Annually)
3-E Sample of Deed Restrictions
4-A Sample Application for Affordable Housing Waiting List
4-B Referral Status Form
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ATTACHMENT 1-A
Municipal Code Chapter 9.64
Chapter 9.64 AFFORDABLE HOUSING PRODUCTION PROGRAM
9.64.010 Findings and Purpose
The City’s affordable housing production program requires developers of market rate multi-
family developments to contribute to affordable housing production and thereby help the City
meet its affordable housing need. As detailed in the findings supporting the ordinance codified in
this Chapter, the requirements of this Chapter are based on a number of factors including, but
not limited to, the City’s long-standing 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 by market-rate development; and the impact that the lack of affordable
housing production has on the health, safety, and welfare of the City’s residents including its
impacts on traffic, transit and related air quality impacts, and the demands placed on the
regional transportation infrastructure. (Added by Ord. No. 2486CCS §§ 1, 2, adopted June 23,
2015)
9.64.020 Definitions
The following words or phrases as used in this Chapter shall have the following meanings:
A. 30% Income Household means a household whose gross income does not exceed the
30% income limits applicable to the Los Angeles-Long Beach Primary Metropolitan
Statistical Area, adjusted for household size, as published and periodically updated by
HUD.
B. 50% Income Household means a household whose gross income does not exceed
50% of the area median income, adjusted for household size, as published and periodically
updated by HUD. 50% income households include 30% income households.
C. 80% Income Household means a household whose gross income does not exceed
80% of the area median income, adjusted for household size, as published and periodically
updated by HUD. 80% income households include 50% income households.
D. Adjusted for Household Size means 70% adjustment for a household of one person,
80% adjustment for a household of two persons, 90% adjustment for a household of three
persons, 100% adjustment for a household of four persons, 108% adjustment for a
household of five persons, 116% adjustment for a household of six persons, 124%
adjustment for a household of seven persons, 132% adjustment for a household size of
eight persons. For households of more than eight persons, adjustments shall be made in
accordance with applicable HUD regulations.
E. Adjusted for Household Size Appropriate for the Unit means for a household of one
person in the case of a studio unit, two persons in the case of a one-bedroom unit, three
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persons in the case of a two-bedroom unit, four persons in the case of a three-bedroom
unit, and five persons in the case of a four-bedroom unit.
F. Affordable Housing Fee means a fee paid to the City by a multi-family project applicant
pursuant to Section 9.64.070 of this Chapter to assist the City in the production of housing
affordable to 30% income households, 50% income households, 80% income households,
and moderate-income households.
G. Affordable Housing Unit means a housing unit developed by a multi-family project
applicant pursuant to Section 9.64.050 or 9.64.060 of this Chapter which will be affordable
to 30% income households, 50% income households, 80% income households, or
moderate-income households.
H. Affordable Housing Unit Development Cost means the City’s average cost to develop
a unit of housing affordable to 30% income households, 50% income households, 80%
income households or moderate income households.
I. Affordable Ownership Housing Cost. Affordable ownership housing cost means: For
moderate income households whose gross incomes exceed the maximum income limits for
80% income households, affordable housing cost shall not be less than 28 percent of the
gross income of the household, nor exceed the product of 35 percent times 110 percent of
the area median income adjusted for household size appropriate for the unit.
J. Affordable Rent. Affordable rent means:
1. For 30% income households, the product of 30 percent times 30 percent of the
area median income adjusted for household size appropriate for the unit.
2. For 50% income households, the product of 30 percent times 50 percent of the
area median income adjusted for household size appropriate for the unit.
3. For 80% income households whose gross incomes exceed the maximum
incomes for 50% income households, the product of 30 percent times 60 percent of
the area median income adjusted for household size appropriate for the unit.
4. For moderate income households, the product of 30 percent times 110 percent of
the area median income adjusted for household size appropriate for the unit.
For purposes herein, affordable rent shall be adjusted as necessary to be consistent with
pertinent Federal or State statutes and regulations governing Federal or State assisted
housing.
K. Area Median Income or AMI. Area median income or AMI means the median family
income published from time to time by HUD for the Los Angeles-Long Beach Metropolitan
Statistical Area.
L. Dwelling Unit. One or more rooms, designed, occupied or intended for occupancy as
separate living quarters, with full cooking, sleeping and bathroom facilities for the exclusive
use of a single household. Dwelling unit shall also include single-room occupancy units as
defined in Santa Monica Municipal Code Section 9.52.020 or any successor thereto.
M. Floor Area. Floor area as defined in Santa Monica Municipal Code Section 9.52.020 or
any successor thereto.
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N. Gross Income. Gross income has the same meaning as provided in Title 25, Section
6914 of the California Code of Regulations, as amended from time to time, in accordance
with law.
O. HCD. The California Department of Housing and Community Development or its
successor.
P. Housing Cost. Housing cost has the same meaning as provided in Title 25, Section
6920 of the California Code of Regulations, as amended from time to time in accordance
with law.
Q. HUD. The United States Department of Housing and Urban Development or its
successor.
R. Income Eligibility. Income eligibility is based upon the gross income of the household,
including the income of all wage earners, elderly or disabled family members, and all other
sources of household income.
S. Market Rate Unit. A dwelling unit as to which the rental rate or sales price is not
restricted by this Chapter.
T. Moderate Income Household means a household whose gross income exceeds the
maximum income for an 80% income household and whose gross income does not exceed
the lesser of: (i) 120% of the area median income, adjusted for household size, as
published and periodically updated by HCD or (ii) twice the income limit for 50% income
households, adjusted for household size, as published and periodically updated by HUD.
U. Multi-family Project. A multi-family residential development, including but not limited to
apartments, condominiums, townhouses or the multi-family residential component of a
mixed use project, for which City permits and approvals are sought.
V. Multi-family Project Applicant. Any person, firm, partnership, association, joint
venture, corporation, or any entity or combination of entities which seeks City development
permits or approvals to develop a multi-family project.
W. Multi-family Residential District. Any district designated in the Santa Monica Zoning
Ordinance as a multi-family residential district.
X. Parcel. Parcel as defined in Santa Monica Municipal Code Section 9.52.020 or any
successor thereto.
Y. Rent. Rent has the same meaning as provided in Title 25, Section 6918 of the California
Code of Regulations, as amended from time to time in accordance with law.
Z. Vacant Parcel. A parcel in a multi-family residential district that has no residential
structure located on it as of August 20, 1998 or which had a residential structure located on
it on that date which was subsequently demolished pursuant to a demolition order of the
City. No demolition of structures shall be permitted except in accordance with Santa
Monica Municipal Code Chapter 9.25 et seq. or any successor thereto. (Added by Ord. No.
2486CCS §§ 1, 2, adopted June 23, 2015)
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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, which project has not received
its ministerial or discretionary planning approvals including, without limitation: variances,
conditional use permits, administrative approvals, development review permits, and
development agreement ordinances which have not yet become effective (collectively,
“Approvals”) on or before July 26, 2013. No building permit shall be issued for any multi-
family project unless such construction has been approved in accordance with the
standards and procedures provided for by this Chapter. Notwithstanding the above, a multi-
family rental housing project that will be developed by a nonprofit housing provider
receiving financial assistance through one of the City’s housing trust fund programs shall
not be subject to the requirements of this Chapter so long as the project is an affordable
housing project meeting the requirements of Santa Monica Municipal Code Section
9.52.020 or any successor thereto and the project’s affordability obligations will be secured
by a regulatory agreement, memorandum of agreement, or recorded covenant with the City
for a minimum period of fifty-five years.
B. Multi-family projects which have received Approvals prior to the effective date of this
ordinance shall be subject to the provisions of Santa Monica Municipal Code Section
9.64.010 et seq., as they existed on the date of their approvals, except that pricing
requirements for affordable housing units shall be published by the City on an annual basis
instead of adoption by resolution of the City Council.
C. 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. (Added by
Ord. No. 2486CCS §§ 1, 2, adopted June 23, 2015)
9.64.040 Affordable Housing Obligation
A. Except as provided in Section 9.23.030(A), all multi-family project applicants shall
comply with the requirements of this Chapter in the following manner:
1. Multi-family project applicants for multi-family ownership projects of four or more
units in multi-family residential districts shall choose one of the two following options:
a. Providing affordable housing units on-site in accordance with Section
9.64.050;
b. Providing affordable housing units off-site in accordance with Section
9.64.060.
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2. In addition to the options established in subsections (1)(a) and (b), all other multi-
family project applicants may also choose one of the following options:
a. Paying an affordable housing fee in accordance with Section 9.64.070;
b. Acquiring land for affordable housing in accordance with Section
9.64.080.
B. A multi-family project application will not be determined complete until the applicant has
submitted a written proposal which demonstrates the manner in which the requirements of
this Chapter will be met. (Added by Ord. No. 2486CCS §§ 1, 2, adopted June 23, 2015)
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, or as an
alternative; (2) twenty percent of the total units as rental units for 80% income households
if these rental units are provided by the 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 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) five percent of the total units as
rental units for 30% income households 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, or as an alternative; (2) twenty-
five percent of the total units as rental units for 80% income households 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 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) ten percent of the total units as rental units for 30%
income households if these rental units 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;
2. Ten percent of the total units of the project for 50% income households;
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3. Twenty percent of the total units of the project for 80% income households; or
4. One hundred percent of the total units of a project for moderate income
households.
D. Except as provided in Section 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)(4) 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 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
4. The multi-family project applicant has elected not to pay the affordable housing
fee pursuant to Section 9.64.070(A)(4), in which case the affordable housing units
must be at least three bedroom units. The design of the affordable housing units shall
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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 1,080 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.
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 Section
9.22.020 or any successor thereto and Section 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 priority 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.
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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. (Added by
Ord. No. 2486CCS §§ 1, 2, adopted June 23, 2015)
9.64.060 Off-Site Option
The following requirements must be met to satisfy the off-site option of this Chapter:
A. The multi-family project applicant for ownership projects of four or more units in multi-
family residential districts shall agree to construct twenty-five percent more affordable
housing units than number of affordable housing units required by Section 9.64.050(A) and
(B).
B. For all other multi-family project applicants, the applicant shall agree to construct the
same number of affordable housing units as specified in Section 9.64.050(C).
C. The multi-family project applicant shall identify an alternate site suitable for residential
housing which the project applicant either owns or has site control over (e.g., purchase
agreement, option to purchase, lease) subject to City review to ensure that the proposed
development is consistent with the City’s housing objectives and projects.
D. The off-site units shall be located within a one-quarter mile radius of the market rate
units.
E. The off-site units shall satisfy the requirements of subsections (D) through (J) of Section
9.64.050.
F. The off-site units shall not count towards the satisfaction of any affordable housing
obligation that development of the alternative site with market rate units would otherwise be
subject to pursuant to this Chapter.
G. Exceptions to the location of the off-site units specified in this Section may be granted by
the Planning Commission on a case-by-case basis upon a showing by the multi-family
project applicant, based upon substantial evidence, that the location of off-site units in a
location different from that specified in this Section better accomplishes the goals of this
Chapter, including maximizing affordable housing production and dispersing affordable
housing throughout the City.
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H. 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 initially being rented or sold, when the required annual reports
are submitted to the City, and when the units are being re-sold or re-leased. (Added by
Ord. No. 2486CCS §§ 1, 2, adopted June 23, 2015)
9.64.070 Affordable Housing Fee
A multi-family project applicant eligible to meet the affordable housing obligations established by
this Chapter by paying an affordable housing fee shall pay the fee in accordance with the
following requirements:
A. An affordable housing fee may be paid in accordance with the following formulas:
1. Affordable housing unit base fee x floor area of multi-family project;
2. Multi-family projects with fractional affordable housing units of less than 0.75
based on the formula established in Section 9.64.050:
(City’s affordable housing unit development cost) x (fractional percentage)
B. For purposes of this Section, the affordable housing unit base fee shall be established
by resolution of the City Council. Commencing on July 1, 2006 and on July 1st of each
fiscal year thereafter, the affordable housing unit base fee shall be adjusted based on
changes in construction costs and land costs. The amount of the affordable housing fee
that the multi-family project applicant must pay shall be based on the affordable housing
unit base fee resolution in effect at the time that the affordable housing fee is paid to the
City.
C. For purposes of this Section, the City’s affordable housing unit development cost shall
be established by resolution of the City Council. Commencing on July 1, 2007 and on July
1st of each fiscal year thereafter, the City’s affordable housing unit development cost shall
be adjusted based on changes in construction costs and land costs. The affordable
housing fee that the multi-family project applicant must pay shall be based on the
affordable housing unit development cost resolution in effect at the time of payment to the
City.
D. The amount of the affordable housing unit base fee may vary by product type (apartment
or condominium) and shall reflect, among other factors, the relationship between new
market rate multi-family development and the need for affordable housing.
E. The affordable housing fee shall be paid in full to the City prior to the City granting any
approval for the occupancy of the project, but no earlier than the time of building permit
issuance.
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F. The City shall deposit any payment made pursuant to this Section in a reserve account
separate from the General Fund to be used only for development of affordable housing,
administrative costs related to the production of this housing, and monitoring and
evaluation of this affordable housing production program. Any monies collected and
interest accrued pursuant to this Chapter shall be committed within five years after the
payment of such fees or the approval of the multi-family project, whichever occurs later.
Funds that have not been appropriated within this five-year period shall be refunded on a
pro rata share to those multi-family project applicants who have paid fees during the
period. Expenditures and commitments of funds shall be reported to the City Council
annually as part of the City budget process.
G. An affordable housing fee payment pursuant to this Section shall not be considered
provision of affordable housing units for purposes of determining whether the multi-family
project qualifies for a density bonus pursuant to Government Code Section 65915. (Added
by Ord. No. 2486CCS §§ 1, 2, adopted June 23, 2015)
9.64.080 Land Acquisition
A. A multi-family project applicant may meet the affordable housing obligations established
by this Chapter by making an irrevocable offer:
1. Dedicating land to the City or a non-profit housing provider;
2. Selling of land to the City or a non-profit housing provider at below market value;
or
3. Optioning of land on behalf of the City or a non-profit housing provider.
Each of these options must be for a value at least equivalent to the affordable housing
obligation otherwise required pursuant to this Section.
B. The multi-family project applicant must identify the land at the time that the development
application is filed with the City. Any land offered pursuant to this Section must be located
within one-quarter mile radius of the market rate units unless the multi-family project
applicant demonstrates that locating the land outside of this radius better accomplishes the
goals of this Chapter, including maximizing affordable housing production and dispersing
affordable housing throughout the City. The City may approve, conditionally approve or
reject such offers subject to administrative guidelines to be prepared by the City Manager
or designee. If the City rejects such offer, the multi-family project applicant shall be
required to meet the affordable housing obligation by other means set forth in this Chapter.
(Added by Ord. No. 2486CCS §§ 1, 2, adopted June 23, 2015)
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9.64.090 Fee Waivers
The Condominium and Cooperative Tax described in Section 6.76.010 of the Santa Monica
Municipal Code or any successor thereto and the Park and Recreation Facilities Tax
established in Chapter 6.80 of Article 6 of the Santa Monica Municipal Code or any successor
thereto, the Transportation Impact Fee required by Chapter 9.66, or any successor thereto, the
Open Space Fee required by Chapter 9.67, or any successor thereto, and the Childcare
Linkage Fee required by Chapter 9.65, or any successor thereto, shall be waived for required
affordable housing units and for 30%, 50%, 80% and moderate-income dwelling units
developed by the City or its designee using affordable housing fee. However, any multi-family
project applicant who elects to pay an affordable housing fee shall not be eligible for any fee
waiver under this Section. (Added by Ord. No. 2486CCS §§ 1, 2, adopted June 23, 2015)
9.64.100 Pricing Requirements for Affordable Housing Units
The City shall publish, on an annual basis, the 30%, 50%, 80%, and moderate income
household levels, and affordable rents for affordable housing units, adjusted for household size
appropriate for the unit. (Added by Ord. No. 2486CCS §§ 1, 2, adopted June 23, 2015)
9.64.110 Eligibility Requirements
A. Only 30%, 50%, 80% and moderate-income households shall be eligible to occupy or
own and occupy affordable housing units. The City shall develop a list of income-qualified
households. Multi-family project applicants shall be required to select households from the
City-developed list of income-qualified households, except applicants of ownership projects
of four or more units in the City’s multi-family residential zones may themselves select
income-qualified households which shall be subject to eligibility certification by the City.
B. The following individuals, by virtue of their position or relationship, are ineligible to
occupy an affordable housing unit:
1. All employees and officials of the City of Santa Monica or its agencies,
authorities, or commissions who have, by the authority of their position, policy-making
authority or influence over the implementation of this Chapter and the immediate
relatives and employees of such City employees and officials;
2. The immediate relatives of the applicant or owner, including spouse, children,
parents, grandparents, brother, sister, father-in-law, mother-in-law, son-in-law,
daughter-in-law, aunt, uncle, niece, nephew, sister-in-law, and brother-in-law. (Added
by Ord. No. 2486CCS §§ 1, 2, adopted June 23, 2015)
9.64.120 Relation to Units Required by Rent Control Board
30%, 50%, 80% and moderate-income dwelling units developed as part of a market rate
project, pursuant to replacement requirements of the Santa Monica Rent Control Board,
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shall count towards the satisfaction of this Chapter if they otherwise meet applicable
requirements for this Chapter including, but not limited to, the income eligibility
requirements, deed restriction requirements, and pricing requirements. New
inclusionary units required by the Rent Control Board which meet the standards of this
Chapter shall count towards the satisfaction of this Chapter. (Added by Ord. No.
2486CCS §§ 1, 2, adopted June 23, 2015)
9.64.130 Deed Restrictions
Prior to issuance of a building permit for a project meeting the requirements of this Chapter by
providing affordable units on-site or off-site, the multi-family project applicant shall submit deed
restrictions or other legal instruments setting forth the obligation of the applicant under this
Chapter for City review and approval. Such restrictions shall be effective for at least fifty-five
years. In addition to the administrative guidelines specifically required by other provisions of this
Chapter, the City Manager or designee shall be the designated authority to enter into recorded
agreements with multi-family project applicants. (Added by Ord. No. 2486CCS §§ 1, 2, adopted
June 23, 2015)
9.64.140 Enforcement
No building permit or occupancy permit shall be issued, nor any development approval granted,
for a project which is not exempt and does not meet the requirement of this Chapter. All
affordable housing units shall be rented or owned in accordance with this Chapter. (Added by
Ord. No. 2486CCS §§ 1, 2, adopted June 23, 2015)
9.64.150 Annual Report
The City Manager or designee, shall submit a report to the City Council on an annual basis
which shall contain information concerning the implementation of this Chapter. This report shall
also detail the projects that have received planning approval during the previous year and the
manner in which the provisions of this Chapter were satisfied. This report shall further assess
whether the provisions of Proposition R have been met and whether changes to this Chapter or
its implementation procedures are warranted. In the event the provisions of Proposition R have
not been met, the City Council shall take such action as is necessary to ensure that the
provisions will be met in the future. This action may include, but not be limited to, amending the
provisions of this Chapter or its implementation. (Added by Ord. No. 2486CCS §§ 1, 2, adopted
June 23, 2015)
9.64.160 Principles and Guidelines
The City Manager or designee, shall develop guidelines to implement this chapter, which
guidelines shall be subject to approval of the City Council. The guidelines shall include, but not
be limited to, the methodology for the establishment and periodic adjustment of the base fee
and the affordable housing unit development cost; for-sale affordable unit requirements, tenant
and purchaser eligibility procedures; and additional requirements for exercise of the off-site
option and land acquisition option. (Added by Ord. No. 2486CCS §§ 1, 2, adopted June 23,
2015)
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9.64.170 Adjustments or Waivers
A. A multi-family project applicant may request that the requirements of this Chapter be
adjusted or waived based on a showing that applying the requirements of this Chapter
would effectuate an unconstitutional taking of property or otherwise have an
unconstitutional application to the property.
B. To receive an adjustment or waiver, the applicant must submit an application to the City
Manager or designee, at the time the applicant files a multi-family project application. The
applicant shall bear the burden of presenting substantial evidence to support the request
and set forth in detail the factual and legal basis for the claim, including all supporting
technical documentation.
C. In making a determination on an application to adjust or waive the requirements of this
Chapter, the City Manager or designee, or City Council on appeal, may assume each of
the following when applicable:
1. The applicant is subject to the affordable housing requirement of this Chapter;
2. The applicant will benefit from the inclusionary incentives set forth in this Chapter
and the City’s Municipal Code;
3. The applicant will be obligated to provide the most economical affordable
housing units feasible in terms of construction, design, location and tenure.
D. The City Manager or designee shall render a written decision within ninety days after a
complete application is filed. The City Manager’s or designee’s decision may be appealed
to the City Council if such appeal is filed within fourteen consecutive calendar days from
the date that the decision is made in the manner provided in Chapter 9.37 Common
Procedures of this Code or any successor thereto.
E. If the City Manager or designee, or City Council on appeal, upon legal advice provided
by or at the behest of the City Attorney, determines that applying the requirements of this
Chapter would effectuate an unconstitutional taking of property or otherwise have an
unconstitutional application to the property, the affordable housing requirements shall be
adjusted or waived to reduce the obligations under this Chapter to the extent necessary to
avoid an unconstitutional result. If an adjustment or waiver is granted, any change in the
use within the project shall invalidate the adjustment or waiver. If the City Manager or
designee, or City Council on appeal, determines that no violation of the United States or
California Constitutions would occur through application of this Chapter, the requirements
of this Chapter remain fully applicable. (Added by Ord. No. 2486CCS §§ 1, 2, adopted
June 23, 2015)
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Affordable Housing Production Program
Attachment 1-B
ATTACHMENT 1-B
AHPP Options Comparison Table
Project Type: Rental Ownership Ownership Ownership Ownership
Project Size: 2+ Apartments 2-3 Units 4-15 Units 16+ Units 2+ Units
Zoning: Any Multifamily Multifamily Multifamily Not Multifamily
Developer Chooses
One Option Below:
1. Construct Units
Onsite:
Moderate Income
Units1 100% 100% 20% 25% 100%
80% Income
Household Rental 20% 20% 20% 25% 20%
50% Income
Household Rental 10% 10% 10% 15% 10%
30% Income
Household Rental 5% 5% 5% 10% 5%
2. Construct Units
Offsite:
Same as
Onsite Options
Same as
Onsite Options
Onsite
Options +25%
Onsite
Options +25%
Same as Onsite
Options
3. Pay Affordable
Housing Fee: $31.25/Sq.Ft. $36.51/Sq.Ft. Not Applicable Not Applicable $36.51/Sq.Ft.
4. Acquire and Donate
Land
See SMMC
9.64.080
See SMMC
9.64.080 Not Applicable Not Applicable See SMMC
9.64.080
Note 1: Moderate-Income residences in this row are the same as the Project Type in terms of owner versus renter.
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Affordable Housing Production Program
Attachment 2-A: Page 1
ATTACHMENT 2-A
Fee Adjustment Methodology
Table 1 – Affordable Housing Unit Base Fee
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Attachment 2-A: Page 2
ATTACHMENT 2-A
Fee Adjustment Methodology
Table 2 – Affordable Housing Unit Development Cost
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Packet Pg. 642 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 2-B
ATTACHMENT 2-B
Current Base Fees for Apartment and Condominium Projects
FEE FOR APARTMENT PROJECTS
Current Fee: $31.25 (Effective November 1, 2015)
FEE FOR CONDOMINIUM PROJECTS
Current Fee: $36.25 (Effective November 1, 2015)
TIMING OF FEE PAYMENT
Base Fee is due prior to completion of project, but not before building permit issuance,
and the amount of fee due is based on fee amount in effect at time of payment.
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Affordable Housing Production Program
Attachment 3-A
ATTACHMENT 3-A
Affordable Housing Table for 4+ Ownership Residences
in Multi-Family Zones
Number of
residences
in project before
density bonus
Number of
affordable
residences to be
provided**
FRACTIONS***
Fraction eligible
for fee payment
Fractional cost of
developing a residence ON-SITE OPTION* [# RESIDENCES X 20%] 2 On-site or off-site residences are not mandatory.
May pay affordable housing fee. 3
4 1.00 0.00 $0.00
5 1.00 0.00 $0.00
6 1.00 0.20 $65,585.40
7 1.00 0.40 $131,170.80
8 1.00 0.60 $196,756.20
9 2.00 0.00 $0.00
10 2.00 0.00 $0.00
11 2.00 0.20 $65,585.40
12 2.00 0.40 $131,170.80
13 2.00 0.60 $196,756.20
14 3.00 0.00 $0.00
15 3.00 0.00 $0.00
16+ [# residences x
25%] [fraction < 0.75] [fraction x unit development cost] OFF-SITE OPTION* [# RESIDENCES X 25%] 2 On-site or off-site residences required are not mandatory
May pay affordable housing fee. 3
4 1.00 0.00 $0.00
5 1.00 0.25 $81,981.75
6 1.00 0.50 $163,963.50
7 2.00 0.00 $0.00
8 2.00 0.00 $0.00
9 2.00 0.25 $81,981.75
10 2.00 0.50 $163,963.50
11 3.00 0.00 $0.00
12 3.00 0.00 $0.00
13 3.00 0.25 $81,981.75
14 3.00 0.50 $163,963.50
15 4.00 0.00 $0.00
etc. etc. [fraction < 0.75] [fraction x unit development cost]
*Ownership residences must be available for very low, low, or moderate income households
*Rental residences must be available for very low or low income households
**For fractions of 0.75 or more - round up to next whole number
***For fractions less than 0.75 - there are 2 options:
1) Pay the fractional cost of developing the unit based on affordable housing unit development cost
($327,927 per residence)
2) Construct all mandatory affordable residences with 3+ bedrooms
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Attachment 3-B: Page 1
ATTACHMENT 3-B
Development Incentives
Density Bonus Table for Housing Developments in Residential Zones
* See Santa Monica Municipal Code Section 9.22 for more information.
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Affordable Housing Production Program
Attachment 3-C
ATTACHMENT 3-C
Extremely-Low, Very-Low, Low- and Moderate Income Levels
2015 Income Limits
MAXIMUM ALLOWABLE INCOME (ANNUAL)
Household
Size
Extremely
Low (30%)
Very Low
(50%)
Low
(80%)
Moderate
(120%)
1 $17,950 $29,900 $47,850 $54,450
2 $20,500 $34,200 $54,650 $62,200
3 $23,050 $38,450 $61,500 $70,000
4 $25,600 $42,700 $68,300 $77,750
5 $28,410 $46,150 $73,800 $83,950
6 $32,570 $49,550 $79,250 $90,200
7 $36,730 $52,950 $84,700 $96,400
8 $40,890 $56,400 $90,200 $102,650
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Packet Pg. 646 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-D
ATTACHMENT 3-D
Maximum Allowable Rents
2015 Maximum Allowable Rent Limits
MAXIMUM ALLOWABLE RENTS
(Based on 30% Affordability Standard)
Residence
Type
Extremely
Low (30%)
Very
Low
(50%)
Low
(80%)
Moderate
(120%)
0-Bdrm $340 $567 $680 $1,247
1-Bdrm $389 $648 $778 $1,426
2-Bdrm $437 $729 $875 $1,604
3-Bdrm $486 $810 $972 $1,782
4-Bdrm $525 $875 $1,050 $1,925
Rents: Median Income for 4-person household x Income Level x Bedroom Adjustment x Affordability
Standard (30%) / 12. (Ref: CA H&SC 50053, H&SC 50052.5(h), SMMC 9.64.020(D))
* Rents limits reflect a hold-harmless approach and are therefore held at their highpoint reached in
2011.
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Attachment 3-E
ATTACHMENT 3-E
Sample Deed Restriction
AGREEMENT IMPOSING RESTRICTIONS
ON RENTS & OCCUPANCY OF REAL PROPERTY
THIS AGREEMENT IMPOSING RESTRICTIONS ON RENTS & OCCUPANCY
OF REAL PROPERTY, entered into this [____] day of [month, 20--], by and between the
CITY OF SANTA MONICA, a Municipal Corporation (hereinafter the "City"), and [name
of applicant], a [California Limited Liability Company] (hereinafter the "Developer"), is
made with reference to the following:
R E C I T A L S:
A. Developer is the owner of certain real property located at [address] in the City
of Santa Monica, in the County of Los Angeles, California (hereinafter referred to as the
"Subject Property"). The Subject Property is more particularly described in Exhibit "A"
which is attached hereto and incorporated herein by this reference.
B. Developer wishes to construct a [project description include # stories,
building square footage, form of ownership apt/condo] a (hereinafter referred to as
the "Project"). The City has approved [type of application #AA, DR, VAR etc.] for the
Project. The City approved the [type of application] subject to the conditions of this
Agreement, which are imposed for the benefit of the City, the public and surrounding
landowners and without which the [type of application] would not be approved.
C. The Project is subject to the requirements of the City's Affordable Housing
Production Program, Santa Monica Municipal Code Chapter 9.64, and the
Administrative Guidelines for Chapter 9.64, as they may be amended from time to time
(all collectively, referenced herein as "Affordability Restrictions"). The Developer has
agreed to satisfy the Affordability Restrictions by fully complying with this Agreement.
NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as
follows:
1. RECITALS.
The Recitals stated above, are hereby incorporated by reference into this
Agreement and adopted by the parties to this Agreement as true and correct.
2. DEFINITIONS.
2.1 “Affordable Units” means dwelling units within the Project that are
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Attachment 3-E
available to and occupied by Fifty Percent Income Households and Eighty Percent
Income Households at Affordable Rent.
2.2 “Affordable Rent” means:
(a) For thirty percent income households, the product of thirty percent times
thirty percent of the area median income adjusted for household size appropriate for the
unit.
(b) For fifty percent income households, the product of thirty percent times fifty
percent of the area median income adjusted for household size appropriate for the unit.
(c) For eighty percent income households whose gross incomes exceed the
maximum incomes for fifty percent income households, the product of thirty percent
times sixty percent of the area median income adjusted for household size appropriate
for the unit.
2.3 “Area Median Income or AMI” means the median family income
published from time to time by the United States Department of Housing and Urban
Development ("HUD") for the Los Angeles-Long Beach Metropolitan Statistical Area.
2.4 “Eighty Percent Income Household” means a household whose gross
income does not exceed the eighty percent income limits applicable to the Los Angeles-
Long Beach Primary Metropolitan Statistical Area, adjusted for household size, as
published and periodically updated by HUD. Eighty Percent Income Households
include Fifty Percent Income Households.
2.5 “Fifty Percent Income Household” means a household whose gross
income does not exceed the fifty percent income limits applicable to the Los Angeles-
Long Beach Primary Metropolitan Statistical Area, adjusted for household size, as
published and periodically updated by HUD. Fifty percent income households include
Thirty Percent Income Households.
2.6 “Life of the Project” shall mean a period commencing on the date of
Certificate of Occupancy is issued for the Project and ending on the date which is fifty-
five (55) years from Certificate of Occupancy for the Project; provided, however, that if
the Project is damaged or destroyed and cannot be rebuilt in accordance with the
development standards permitted in this Agreement, then the Life of the Project shall be
deemed to have ended as of the date of such damage or destruction.
2.7 “Rent” has the same meaning as provided in title 25, section 6918 of the
California Code of Regulations, as amended from time to time in accordance with law.
2.8 “Thirty Percent Income Household” means a household whose gross
income does not exceed the thirty percent income limits applicable to the Los Angeles-
Long Beach Primary Metropolitan Statistical Area, adjusted for household size, as
published and periodically updated by HUD.
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Packet Pg. 649 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-E
3. CONTRACT WITH CITY.
Developer hereby acknowledges that in issuing the [type of application] for the
Project, the City is reducing or modifying development standards otherwise applicable to
the Project such as increasing unit density, reducing parking and other property
development standards, and/or waiving fees. In exchange for such forms of assistance
from the City, which are of financial benefit to the Developer, Developer has entered into
this contract with this City and agreed to the other conditions of the [type of permit see
above], including the requirement included in this Agreement to provide and maintain [#]
Affordable Units on the Subject Property for occupancy by qualified households who meet
the requirements specified in this Agreement. The parties agree and acknowledge that
this is a contract providing forms of assistance to the Developer within the meaning of
Civil Code Section 1954.52 (b) and Government Code Section 65915 et seq.
4. DEVELOPER TO PROVIDE AND MAINTAIN [Total # deed restricted
units] Example: TEN (10) AFFORDABLE UNITS.
(a) Upon issuance of a Certificate of Occupancy for the Project, Developer shall
provide and maintain [#] Affordable Units on the Subject Property, as follows:
[# and type of unit] Example: Ten (10) one-bedroom Affordable Units shall be
available to and occupied by [insert affordability level] Example: Fifty Percent Income
Households at Affordable Rent.
Developer shall submit plans to the City's Building Official, identifying the unit
numbers and exact locations of all of the Affordable Units. The submittal of these plans
with the required identification of Affordable Units shall be a condition precedent to
Developer's obtaining a building permit for the Project.
(b) The Affordable Units shall be rental units and the maximum rent shall be
calculated pursuant to the formula set forth in Section 5 of this Agreement.
(c) The City shall issue a Certificate of Occupancy for the Project ("Certificate")
expressly contingent upon compliance with the terms of this Agreement. A valid
Certificate shall be required at all times to continue to use or occupy the Project. A breach
of this Agreement shall be grounds for revoking the Certificate. The City shall provide
reasonable notice and an opportunity to cure any breach of this Agreement prior to
revoking the Certificate.
5. TERMS FOR THE RENTAL OF THE AFFORDABLE UNITS.
The maximum Affordable Rent for the [#] Affordable Units on the Subject Property
shall be as follows:
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Packet Pg. 650 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-E
(a) If the household is receiving a rental housing subsidy, the maximum
allowable rent shall be the lesser of the Affordable Rent calculated under subparagraph
(b) of this Section 5 or the payment standard authorized by the Santa Monica Housing
Authority.
(b) If the household is not receiving federal rental assistance as defined above,
the maximum allowable rent for the unit shall be calculated as follows:
For Fifty Percent Income Households
Area Median Income x 50% x Bedroom Adjustment Factor x 30% = Maximum
Affordable Rent (Annual).
For Eighty Percent Income Households
Area Median Income x 60% x Bedroom Adjustment Factor x 30% = Maximum
Affordable Rent (Annual).
The Maximum Allowable Rent figures must be divided by twelve to determine the
maximum allowable monthly rent.
The formula for the calculation of rents as of the date of this Agreement is as
follows:
(c) Area Median Income - As periodically published by HUD, currently $64,800
(for a family of four).
(d) Bedroom Adjustment Factors
0 Bedroom .7 3 Bedrooms 1.00
1 Bedroom .8 4 Bedrooms 1.08
2 Bedroom .90
(e) Affordable Rents 2015, to be updated annually3
Studio 1-BR 2-BR 3BR
Fifty Percent Income Household $567 $648 $729 $810
Eighty Percent Income Household $680 $778 $875 $972
(f) In the event the standards for establishing the monthly rental rate of the
Affordable Units set forth in Section 5 cease to exist, the parties shall substitute a similar
3 These numbers include the utility allowance adopted by the City's Housing Authority for 2015, and is
adjusted annually thereafter.
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Packet Pg. 651 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-E
standard established by HUD or its successor governmental agency. If the parties are
unable to agree upon a substitute standard, the parties shall refer the choice of the
substitute standard to binding arbitration in accordance with the rules of the American
Arbitration Association.
(g) Minimum Occupancy Requirements
0 bedroom 1 occupant
1 bedroom 1 occupants
2 bedroom 2 occupants
3 bedrooms 3 occupants
4 bedrooms 5 occupants
6. HOUSEHOLD ADJUSTMENT FACTORS.
The Household Adjustment Factors are as follows:
1 person 0.7
2 persons 0.8
3 persons 0.9
4 persons 1.0
5 persons 1.08
6 persons 1.16
7 persons 1.24
8 persons 1.32
During the duration of this agreement, developer agrees to make reasonable
efforts to rent vacant Affordable Units within sixty days.
7. TENANT SELECTION.
Developer shall select households from the City-developed list of income qualified
households. Only households selected from the City-developed list of income qualified
households shall occupy any of the Affordable Units.
8. CITY APPROVAL OF DOCUMENTS.
The Conditions, Covenants and Restrictions (CC&R's), if any, for the Subject
Property shall include reference to all applicable obligations and duties of the parties
created by this Agreement. The City Attorney of the City of Santa Monica shall approve
as to form the CC&R's prior to recordation of the final subdivision or parcel map for the
Subject Property.
Developer shall rent the Affordable Units pursuant to the terms and conditions of
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Packet Pg. 652 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-E
a lease or rental agreement approved by the City. At least ninety days prior to the
expected completion date, Developer shall submit to the City Housing Division for review
a copy of the lease agreement to be used. In addition to any other provision required by
the City to ensure compliance with Chapter 9.64 and the Administrative Guidelines for
Chapter 9.64, as they may be amended from time to time, said lease or rental agreement
shall contain a provision prohibiting subleasing of the Affordable Units or revising the
composition of the household without Developer's permission. Developer shall not
approve any change that renders the Affordable Units in noncompliance with the
household income requirements of this Agreement. The addition to the household of
minor children, a spouse, or registered domestic partner shall not be deemed a change
in the household requiring Developer's prior approval pursuant to this Section.
Developer shall lease the Affordable Units concurrently with all other units in the
Project so as to avoid prolonged vacancy of the Affordable Units during lease-up of the
Project.
9. ATTORNEYS' FEES AND COSTS.
In the event of any controversy, claim or dispute between the parties hereto, arising
out of or relating to this Agreement or breach thereof, the prevailing party shall be entitled
to recover from the losing party reasonable expenses, attorneys' fees and costs.
10. APPOINTMENT OF OTHER AGENCIES.
The City may designate, appoint or contract with any other public agency to
perform City's obligations under this Agreement.
11. SEVERABILITY.
In the event any limitation, condition, restriction, covenant or provision contained
in this Agreement is held to be invalid, void or unenforceable by any court of competent
jurisdiction, the remaining portions of this Agreement shall, nevertheless, be and remain
in full force and effect.
12. NOTICES.
All notices required under this Agreement shall be sent by certified mail, return
receipt requested, to the following addresses:
TO THE CITY OF SANTA MONICA: City of Santa Monica
Planning and Community Development
Department
1685 Main Street, Room 212
Santa Monica, California 90401
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Packet Pg. 653 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-E
Attention: Director, Planning and
Community Development Department
TO THE DEVELOPER: [enter developer name/address]
Any party may change the address to which notices are to be sent by notifying the
other parties of the new address, in the manner set forth above.
13. HOLD HARMLESS.
As between the City and the Developer, the Developer is deemed to assume
responsibility and liability for, and the Developer shall indemnify and hold harmless the
City and its City Council, boards and commissions, officers, agents, servants or
employees from and against any and all claims, loss, damage, charge or expense,
whether direct or indirect, to which the City or its City Council, boards and commissions,
officers, agents, servants or employees may be put or subjected, by reason of any
damage, loss or injury of any kind or nature whatever to persons or property caused by
or resulting from or in connection with any act or action, or any neglect, omission or failure
to act when under a duty to act, on the part of the Developer or any of Developer's officers,
agents, servants, employees or subcontractors in his or their performance hereunder.
14. BURDEN TO RUN WITH PROPERTY.
The covenants and conditions herein contained shall apply to and bind the heirs,
successors and assigns of all the parties hereto and shall run with and burden the Subject
Property for the benefit of the City, the public and surrounding landowners, until
terminated in accordance with the provisions hereof. Developer shall expressly make the
conditions and covenants contained in this Agreement a part of any deed or other
instrument conveying any interest in the Subject Property.
15. SALE OR CONVERSION OF PROPERTY.
In the event of sale or conversion of the subject property, any Conditions,
Covenants and Restrictions (CC&R's) for the property, shall incorporate by reference all
obligations and duties of the parties created by this Agreement. Reporting obligations set
forth in Section 24 below, shall be set forth in the CC&R's if any, for the project.
16. PROHIBITION AGAINST DISCRIMINATION.
Developer agrees not to discriminate against any actual or potential occupant of
the subject property on the basis of sex, race, color, religion, ancestry, national origin,
sexual orientation, age, pregnancy, marital status, handicap, HIV, family composition,
source of income, the use of a rental subsidy voucher, or the potential or actual occupancy
of minor children. Developer further agrees to take affirmative action to ensure that no
such person is discriminated against for any of the aforementioned reasons.
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Packet Pg. 654 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-E
17. STANDING TO ENFORCE AGREEMENT.
Violation of this Agreement may be enjoined, abated or remedied by appropriate
legal proceeding in a court of competent jurisdiction by any aggrieved party, including but
not limited to, the parties hereto, or their respective successors, heirs and assigns.
The right to specific performance of this Agreement shall be an appropriate remedy
for a breach of this Agreement because of the uniqueness of the Property and the inherent
difficulty in calculating adequate damages.
18. INTEGRATED AGREEMENT.
This Agreement constitutes the entire agreement between the parties and no
modification hereof shall be binding unless reduced to writing and signed by the parties
hereto.
19. APPLICABLE LAW.
All questions pertaining to the validity and interpretation of this Agreement shall be
determined in accordance with the laws of California applicable to contracts made to and
to be performed within the State.
20. CITY AUTHORITY TO ENFORCE LAW
The obligation of the Owner pursuant to this Agreement are in addition to, and in
no way limit, the authority of the City to enforce all laws and regulation applicable to the
Subject Property. Nothing in this Agreement shall limit the authority of the City to take
appropriate action to enforce the terms of any permit issued by the City relating to the
Subject Property.
21. DURATION OF AGREEMENT.
This Agreement shall terminate and become null and void fifty-five (55) years from
issuance of the Certificate of Occupancy.
22. AMENDMENT OF AGREEMENT.
This Agreement, and any Section, subsection, or covenant contained herein, may
be terminated or amended only upon the written consent of all parties hereto.
23. RECORDING OF AGREEMENT.
The parties hereto shall cause this Agreement to be recorded in the Official
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Packet Pg. 655 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-E
Records of the County of Los Angeles.
24. YEARLY REPORT.
Developer shall issue a written report to City on an annual basis commencing one
year from the date of issuance of the Certificate of Occupancy and continuing thereafter
throughout the term of the Agreement. The report shall state the rent level then being
charged for the Affordable Units, whether the occupants are assisted by a rental housing
subsidy program, the number of occupants in the household, whether there have been
any changes in the composition of the household, whether any vacancies have occurred
during the reporting year, any changes in income of the residents of the affordable units,
and such other information as may be required by City staff.
25. COMPLIANCE MONITORING.
Pursuant to City of Santa Monica Resolution 10635 (CCS) and Santa Monica
Municipal Code Sections 9.64.050 and 9.64.060, Developer shall pay the reasonable
regulatory costs of ensuring compliance with this Agreement through a Compliance
Monitoring Fee, adopted and approved on November 22, 2011 and administratively
revised on an annual basis.
\\\
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Packet Pg. 656 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-E
26. AUTHORITY TO EXECUTE.
The undersigned declare they have full authority to execute this Agreement on
behalf of Developer, and bind Developer to all the terms and conditions contained herein.
[Note: document text needs to be part of signature page; set hard page breaks
when necessary]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first above written.
ATTEST: “CITY” CITY OF SANTA MONICA a Municipal Corporation ___________________________ Denise Anderson-Warren City Clerk By: ____________________________ Rick Cole APPROVED AS TO FORM: City Manager SANTA MONICA CITY ATTORNEY __________________________ MARSHA JONES MOUTRIE City Attorney “DEVELOPER” [Name], LLC a California limited liability company
By_______________________
[name, and title, i.e. Manager, trustee,
owner etc]
Prepared by: Planner Name
Reference Number: XXDED-XXX
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Packet Pg. 657 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-E
EXHIBIT A
LOT -----------, BLOCK ---------, TRACT ------------ IN THE CITY OF SANTA MONICA,
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK XX PAGE XXX, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.
(Insert Complete Legal Description)
APN ___________
Commonly Known As: [Street Address]
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Packet Pg. 658 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 3-E
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the
document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
ACKNOWLEDGMENT
STATE OF __________________ }ss:
COUNTY OF ________________
On before me, , a Notary Public,
(insert name and title of the officer)
personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the
instrument.
I certify under PENALTY OF PERJURY under the laws of the State of _______________________ that the foregoing paragraph is
true and correct.
WITNESS my hand and official seal.
Signature (Seal)
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Packet Pg. 659 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 4-A
ATTACHMENT 4-A (Updated for 2016 AHPP Guidelines Update)
Sample Application for Affordable Housing Eligibility List
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Packet Pg. 660 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines
Affordable Housing Production Program
Attachment 4-A
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Packet Pg. 661 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Administrative Guidelines Affordable Housing Production Program
Attachment 4-B
ATTACHMENT 4-B (Updated for 2016 AHPP Guidelines Update)
Property Address
Owner/Manager Name
Phone #/Email
Residence #
Name and Phone Number
Referral #1:
Was #1
Offered the
Residence?
Yes No
Comments:
Did #1
Accept the
Residence?
Yes No
Comments:
Name and Phone Number
Referral #2:
Was #2
Offered the
Residence?
Yes No
Comments:
Did #2
Accept the
Residence?
Yes No
Comments:
Name and Phone Number
Referral #3:
Was #3
Offered the
Residence?
Yes No
Comments:
Did #3
Accept the
Residence?
Yes No
Comments:
Housing Division
Waiting List Referral Form
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Packet Pg. 662 Attachment: AHPP Administrative Guidelines (5378 : Affordable Housing Production Program Fees)
Memorandum
To: City Council
From: Andy Agle, Director, Community Services Department
RE: Proposed FY 2022-23 Annual Automatic Adjustment for the Affordable
Housing Unit Base Fee
This memo summarizes the results of applying the annual adjustment calculation
methodology adopted by the City to establish the Affordable Housing Unit Base
Fee pursuant to Santa Monica Municipal Code Section 9.64.070.B (“the affordable
housing unit base fee shall be adjusted [annually] based on changes in
constructions costs and land costs.”). This methodology was approved by the
Santa Monica City Council at a public hearing on June 13, 2006, based on the
recommendation of HR&A in a letter to City staff dated April 24, 2006. A copy of
the April 24, 2006 letter is included for reference as Attachment A hereto. The City
Council approved the last annual increase for FY 2021-22 using this methodology
when it adopted Resolution No. 111356(CCS) on August 24, 2021.
For the construction cost inflation component of the calculation approach, the
Engineering News Record’s (ENR) Construction Cost Index specific to the Los
Angeles metro area is utilized, because it is updated monthly and is readily
available via the Internet by subscription. The applicable index change was 10.1
percent measured between March 2022 (the current budget adoption year) and
March 2021, as compared with a 0.6 percent change between March 2021 and
March 2020.
Although there is no comparable index for inflation in land cost, the City-adopted
method uses the weighted average annual change in median condominium sale
prices, by ZIP Code, as a proxy measure for land cost changes measured for the
immediately preceding calendar year. Based on our analysis of 2021 sales data
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Packet Pg. 663 Attachment: Staff Analysis: Proposed FY 2022-23 Annual Automatic Adjustment for the Affordable Housing Unit Base Fee [Revision 2] (5378 :
compiled by Dataquick from Los Angeles County Assessor records, the weighted
average change for the City during 2021 was 10.6 percent, as compared with a
negative 10.5 percent decrease during 2020.
The relative balance between land cost inflation (based on changes in median
condo prices) and construction cost inflation (based on a construction cost index)
continues to be based on development cost data for the two most recently
completed and/or under-construction multi-family affordable developments
assisted by the City. For the current analysis, the two City-assisted projects are
1819 Pico Boulevard and 1834-1848 14th Street. The City-adopted calculation
approach uses a simple average of the ratio between land purchase price and
the sum of land cost and hard construction cost to derive the land value
percentage (29.2%). The inverse of the land value percentage is the construction
cost share (70.8%).
Table 1, on the following page, presents the annual adjustment calculation
establishing the Affordable Housing Unit Base Fee for FY 2022-23. It shows that a
weighted average inflation index using this City Council-approved approach
results in a 10.2 percent annual increase (as compared with a negative 2.7 percent
adjustment for FY 2021-22):
▪ $39.12 per square foot for apartment developments (an increase of $3.62 per
square foot from the FY 2021-22 Fee).
▪ $45.70 per square foot for condominium developments (an increase of $4.23
per square foot from the FY 2021-22 Fee); and
The results of the calculations shown in Table 1 will be the basis for a Resolution
changing the Affordable Housing Base Fee for FY 2022-23.
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ATTACHMENT A
April 24, 2006 HR&A Letter re: Annual Adjustment
Methodology
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Memorandum
To: City Council
From: Andy Agle, Director, Community Services Department
Re: Proposed FY 2022-23 Annual Adjustment for the Affordable Housing Unit
Development Cost
This memo summarizes the results of applying an annual adjustment to the
Affordable Housing Unit Development Cost pursuant to Santa Monica Municipal
Code (SMMC) Section 9.64.070.C (“. . . Commencing on July 1, 2007 and on July 1st
of each fiscal year thereafter, the City’s affordable housing unit development
cost shall be adjusted based on changes in construction costs and land costs . .
.”). The inflation methodology is the same as that used to produce annual
adjustments for the Affordable Housing Unit Base Fee, pursuant to SMMC Section
9.64.070.B. That methodology was approved by the Santa Monica City Council
at a public hearing on June 13, 2006, based on the recommendation of HR&A in a
letter to City staff dated April 24, 2006. A copy of the April 24, 2006 letter is
included for reference as Attachment A hereto.
SMMC Section 9.64.070.A.2 provides that developers of market rate multi-family
housing are eligible to pay a fee equal to a fraction of an affordable unit when
the number of units otherwise required by Section 9.64.050.D is less than 0.75. In
such cases, the amount of the fee is equal to the City’s Affordable Housing Unit
Development Cost multiplied by the fractional unit. The City’s Affordable Housing
Development Unit Cost is defined as the average cost to the City to develop a unit
of housing affordable to low- and moderate-income households. The
Affordable Housing Unit Development Cost was originally estimated to be
$239,949, as contained in the nexus study prepared by HR&A in 20051 to support
the imposition of the Affordable Housing Unit Base Fee. The amount of the
1 Hamilton, Rabinovitz & Alschuler, Inc., The Nexus Between New Market Rate Multi-Family Developments in the City of
Santa Monica and the Need for Affordable Housing, 2005 Update, July 1, 2005, prepared for the City of Santa
Monica.
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Packet Pg. 671 Attachment: Staff Analysis: Proposed FY 2022-23 Annual Automatic Adjustment for the Affordable Housing Unit Development Cost [Revision 2]
Affordable Housing Unit Development Cost is equal to the City’s total cost to
develop a unit of affordable housing (i.e., land, construction, professional fees and
other “soft” costs and financing costs) minus the amount of construction loan
that can be supported by the net operating income derived from operating a
typical City-assisted affordable housing development. A 2005-2007 cumulative
inflation increase for the Affordable Housing Unit Development Cost to $265,632
using the approved methodology was adopted by the City Council when it
approved Resolution No. 10230 (CCS) on July 24, 2007. The City Council
approved the last annual increase for FY 2021-22 using this methodology when it
adopted Resolution No. 111357 (CCS) on August 24, 2021.
For the construction cost inflation component of the calculation approach, the
Engineering News Record’s (ENR) Construction Cost Index specific to the Los
Angeles metro area is utilized, because it is updated monthly and is readily
available via the Internet with a subscription. The applicable index change was
10.1 percent measured between March 2022 (the current budget adoption year)
and March 2021, as compared with a 0.6 percent change between March 2021
and March 2020.
Although there is no comparable index for inflation in land cost, the City-adopted
calculation method uses the weighted average annual change in median
condominium sale prices, by ZIP Code, as a proxy measure for land cost changes
measured for the immediately preceding calendar year. Based on our analysis of
2021 sales data compiled by DQNews from Los Angeles County Assessor records,
the weighted average change for the City during 2021 was 10.6 percent, as
compared with a 10.5 percent decrease during 2020.
The relative balance between land cost inflation (based on changes in median
condo prices) and construction cost inflation (based on a construction cost
index) continues to be based on development cost data for the two most recently
completed and/or under-construction multi-family affordable developments
assisted by the City. For the current analysis, the two City-assisted projects are
1819 Pico Boulevard and 1834-1848 14th Street. The City-adopted calculation
approach uses a simple average of the ratio between land purchase price and
the sum of land cost and hard construction cost to derive the land value
percentage (29.2%). The inverse of the land value percentage is the
construction cost share (70.8%).
Table 1, on the following page, presents the annual adjustment calculation
establishing the Affordable Housing Unit Development Cost for FY 2022-23. It
shows that a weighted average inflation index using the City Council-approved
approach results in a 10.2 percent annual increase (compared with a 2.7 percent
decrease for FY 2021-22), to $410,451, which is a $37,991 increase compared with
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Packet Pg. 672 Attachment: Staff Analysis: Proposed FY 2022-23 Annual Automatic Adjustment for the Affordable Housing Unit Development Cost [Revision 2]
the FY 2021-22 Housing Unit Cost.
The results of the calculations shown in Table 1 will be the basis for a Resolution
changing the Affordable Housing Unit Development Cost for FY 2022-23.
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Packet Pg. 673 Attachment: Staff Analysis: Proposed FY 2022-23 Annual Automatic Adjustment for the Affordable Housing Unit Development Cost [Revision 2]
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Packet Pg. 674 Attachment: Staff Analysis: Proposed FY 2022-23 Annual Automatic Adjustment for the Affordable Housing Unit Development Cost [Revision 2]
ATTACHMENT A
April 24, 2006 HR&A Letter re: Annual Adjustment
Methodology
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Packet Pg. 675 Attachment: Staff Analysis: Proposed FY 2022-23 Annual Automatic Adjustment for the Affordable Housing Unit Development Cost [Revision 2]
HR&A Advisors, Inc. FY 2017-18 Affordable Housing Unit Development Cost| 5
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HR&A Advisors, Inc. FY 2017-18 Affordable Housing Unit Development Cost| 6
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HR&A Advisors, Inc. FY 2017-18 Affordable Housing Unit Development Cost| 7
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HR&A Advisors, Inc. FY 2017-18 Affordable Housing Unit Development Cost| 8
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City Council Report
City Council Meeting: August 24, 2021
Agenda Item: 3.E
1 of 5
To: Mayor and City Council
From: Andy Agle, Director, Community Services Department, Housing and Human
Services
Subject: Adoption of Resolutions for Affordable Housing Production Program Fees
Recommended Action
Staff recommends that the City Council:
1. Adopt the attached Resolution decreasing the Affordable Housing Unit Base Fee
by 2.7 percent for new market-rate apartments and condominiums (Attachment
A); and
2. Adopt the attached Resolution decreasing the Affordable Housing Unit
Development Cost by 2.7 percent (Attachment B).
Summary
A key element of Santa Monica’s strategy to increase housing affordability is requiring
market-rate housing developers to assist with creating affordable housing. Developers
must either construct residences that are affordable to low- and moderate-income
households or pay a fee, which is used to subsidize affordable housing built by nonprofit
developers. The City calculates and publishes adjustments to the Affordable Housing
Unit Base Fee and Affordable Housing Unit Development Cost on an annual basis, to
keep pace with changes in land and construction costs.
The calculation methodology approved by City Council uses a combination of the
annual change in median condominium sale prices in Santa Monica as a proxy measure
for land cost changes and the change in construction costs based upon the Engineering
News Record’s (ENR) Construction Cost Index specific to the Los Angeles area
(Attachment C). The land cost and construction cost factors are weighted based on
development cost data for the two most recently completed or under construction multi-
family affordable developments financed by the City.
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Based on 2020 sales data compiled by DQNews using Los Angeles County Assessor
and Recorder data, the weighted change for the City in median condominium sale
prices from 2019 to end of year 2020 was negative 10.5 percent. Condominium sale
prices in Santa Monica have since increased from 2020 levels, however these
increases will not be captured until next year’s calculation and adjustment.
The ENR Construction Cost Index increased 0.6 percent between March 2020 and
March 2021. Recent increases in construction costs began in May of 2021 and will be
captured in next year’s calculation. A land cost inflation weight of 29.2 percent and
construction cost inflation weight of 70.8 percent results in a 2.7 percent decrease. The
table below on page 3 summarizes the annual adjustment formula calculation.
The new Affordable Housing Unit Base Fee and Affordable Housing Unit Development
Cost would be 2.7 percent lower than the existing amounts. The new amounts would
become effective November 1, 2021, if approved. The table below summarizes the
adjustments in previous years.
Historical Annual Adjustment Rate
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
-1.2% 2.1% 0.8% 0.8% 7.2% 4.9% 3.6% 5.0% 5.0% 2.2% 0.0% -2.7%
Discussion
The Affordable Housing Production Program (AHPP), Chapter 9.64 of the City’s
Municipal Code, implements Proposition R, which establishes that not less than
thirty percent of all newly constructed multi-family housing in the City annually must be
affordable to low- and moderate-income households for at least 55 years. The AHPP
requires developers of new market-rate multi-family housing to contribute to affordable
housing goals by designating a portion of a development’s total residences as
affordable housing, constructing affordable housing off-site, designating land for
affordable housing development, or paying an affordable housing fee, in accordance
with the following formulas:
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1. Affordable housing unit base fee x floor area of multi-family project;
2. Multi-family projects with fractional affordable housing units of less than 0.75
based upon the formulas established in Section 9.64.050: Affordable Housing
Unit Development cost x fractional percentage.
When the formula calculation for required affordable residences results in a fraction of
less than 0.75, the obligation can be satisfied by payment of a fee based upon the
Affordable Housing Unit Development Cost. For example, if a development is required
to provide 4.7 units of affordable housing, the developer is required to designate four
affordable residences and pay 0.7 times the Affordable Housing Unit Development Cost
to satisfy the requirement associated with the fraction.
Annual Fee Adjustments
Section 9.64.070 of the AHPP provides that the Affordable Housing Unit Base Fee and
the Affordable Housing Unit Development Cost shall be adjusted annually by Council
resolution based on changes in construction and land costs. The fee adjustment
methodology is detailed in Section 2 of the AHPP Administrative Guidelines
(Attachment D) and reflects the methodology approved by Council in 2006. The fees are
adjusted based on two factors: 1) changes in construction costs as measured by the
Engineering News Records Construction Cost Index, and 2) changes in land costs
measured by using the proxy of change in median condominium sales prices.
The table below summarizes the changes in these two factors since 2020, and the
calculation results in a 2.7 percent decrease in 2021.
Inflation Factor Derivation
Inflation
Volume Weight
Weighted
Average
Land Value Inflation -10.5% 29.2% -3.1%
Construction Cost Inflation 0.6% 79.8% 0.4%
-2.7%
Unit Base Fee and Unit Development Cost, which would decrease by 2.7 percent based
on this year’s changes in land and construction costs.
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The table below summarizes this year’s proposed adjustment to the Affordable Housing.
Fee Description 2020
Amount
2021
Amount
%
Change
Affordable Housing Unit Base Fee –
Apartments (per square foot) $36.49 $35.50 -2.7%
Affordable Housing Unit Base Fee –
Condominiums (per square foot) $42.62 $41.47 -2.7%
Affordable Housing Unit Development
Cost $382,795 $372,460 -2.7%
The proposed Resolutions, Attachments A and B, would adjust the fees accordingly,
effective November 1, 2021. Details of the calculations prepared by staff for the
Affordable Housing Unit Base Fee and the Affordable Housing Unit Development Cost
are provided in Attachment E and Attachment F. The revenue implications resulting
from the proposed fees adjustment are anticipated to be minimal, as fee revenues
depend on development activity in any given year.
On August 2, 2021, the City published notice in the Santa Monica Daily Press of this
hearing and the availability of the staff analyses. The City republished this notice on
August 9, 2021. Copies of these analyses have been available in the City Clerk's Office
for public review since August 2, 2021.
Past Council Actions
August 13, 2019
(Attachment G)
The previous annual adjustment increasing the fees by five
percent.
June 13, 2006
(Attachment H)
City Council approved the methodology for ascertaining
changes in these costs and thereby calculating the adjustment.
July 21, 1998
(Attachment I)
The AHPP was adopted by the City Council and has been
periodically amended, as necessary.
Council resolutions were not necessary in 2020 because the calculation resulted in no
adjustments to the Affordable Housing Unit Base Fee and the Affordable Housing Unit
Development Cost. The November 12, 2020 Info Item (Attachment J) outlines the
changes in the factors that resulted in no adjustments.
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Financial Impacts & Budget Actions
The proposed rate change in the Affordable Housing Unit Base Fee and Unit
Development Cost is expected to decrease annual revenues by approximately $8,100
per year depending on development activity levels. The proposed rate change is not
anticipated to impact the development of affordable housing in the City. Revenues are
recorded in account 10400001.415300.
Prepared By: Nigel Wallace, Senior Administrative Analyst
Approved
Forwarded to Council
Attachments:
A. Proposed Resolution: Base Fee
B. Proposed Resolution: Development Cost
C. Land and Construction Cost Inflation Source Data
D. AHPP Administrative Guidelines
E. Staff Analysis: Proposed FY2021-22 Unit Base Fee Adjustment Memo
F. Staff Analysis: Proposed FY2021-22 Development Cost Adjustment Memo
G. August 13, 2019 Staff Report
H. June 13, 2006 Staff Report (Web Link)
I. July 21, 1998 Staff Report (Web Link)
J. November 19, 2020 Info Item
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