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SR 12-13-2022 10D City Council Report City Council Meeting: December 13, 2022 Agenda Item: 10.D 1 of 9 To: Mayor and City Council From: David Martin, Director, City Planning Subject: Introduction and Adoption of an Emergency Interim Zoning Ordinance to Allow 100% Affordable Housing Projects to Request Waivers or Reductions of Development Standards Pursuant to State Density Bonus Law Recommended Action Staff recommends that the City Council: 1. Adopt a finding that no subsequent environmental review is required pursuant to California Environmental Quality Act (CEQA) Guidelines § 15162 based on a determination that the proposed project was analyzed as part of the 2021-2029 6th Cycle Housing Element Environmental Impact Report (EIR) [SCH No. 20212269242021] that was certified by Council on October 12, 2021 with an Addendum to the EIR approved on October 11, 2022. 2. Introduce and adopt an emergency interim zoning ordinance to allow 100% affordable housing projects that receive unlimited density and up to three stories or 33 feet in additional height under State Density Bonus Law to request additional waivers or reductions of development standards. Summary On October 11, 2022, the City Council adopted an amended 6th Cycle (2021-2029) Housing Element, which was subsequently certified by California’s Housing and Community Development Department (“HCD”) as compliant with State Housing Element Law on October 14, 2022. The City’s certified 6th Cycle Housing Element includes a commitment to implement certain programs by October 15, 2023, that focus on planning for new housing units consistent with the City’s Regional Housing Needs Assessment (“RHNA”) allocation of 8,895 housing units with approximately 70 percent allocated as affordable housing. One of the key principles of the 6th Cycle Housing Element, consistent with the City’s RHNA allocation and longstanding commitment to affordable 10.D Packet Pg. 494 2 of 9 housing, is to increase housing production for all, with an emphasis on production of affordable housing units in Santa Monica. State Density Bonus Law provides significant advantages for 100% affordable housing projects that are within one-half mile of a “major transit stop”, which, for purposes of State law, includes, but is not limited to, rail stations, bus rapid transit stations, and the intersection of certain qualifying bus routes. These advantages include: • Extra 3 stories or 33 feet of building height; • No maximum controls on density (i.e., no limit to number of units in the project’s building envelope); and • Up to four (4) incentives/concessions from development standards in the Municipal Code. In addition to incentives and concessions, projects that request a State Density Bonus also typically have the option of also requesting waivers or reductions of development standards that physically preclude development of a project. Prior versions of State Density Bonus Law prohibited 100% affordable housing projects that receive unlimited density from also being able to request waivers or reductions of development standards (in addition to the 4 incentives/concessions already granted). However, in processing projects, staff has found that this may constitute a barrier to 100% affordable housing projects that need more relief from the code as contemplated by State Density Bonus Law. As a result, staff proposes an Emergency Interim Zoning Ordinance (“IZO”) to remove potential barriers to production of 100% affordable housing projects that are within one- half mile of a major transit stop on an interim basis while the City continues implementation of adopted Housing Element programs. Housing Element implementation, which is scheduled to be presented to the City Council in Spring 2023, includes comprehensive rezoning and process streamlining as set forth in required 6th Cycle Housing Element Programs including but not limited to 1F (Downtown standards), 1J (Citywide standards), 2C (AHPP Update), and 2D (State Density Bonus). More 10.D Packet Pg. 495 3 of 9 specifically, for purposes of the proposed Emergency IZO, Housing Element Program 2D requires revisions to the City’s Density Bonus Ordinance to ensure consistency with recent changes in State Density Bonus Law, California Government Code Section 65915 et seq. (“SDBL”). The proposed Emergency IZO would allow these projects to request “waivers or reductions” of development standards that would physically preclude the development of the affordable housing project. Staff will be proposing that this change be made on a permanent basis in Spring 2023 as part of implementation of Housing Element Program 2D, which includes a broader Density Bonus Ordinance update. In the interim, in order to continue to support the production of 100% affordable housing development, the proposed Emergency IZO is recommended for adoption immediately. This would help to ensure the City does not lose the opportunity to approve applications for 100% affordable housing projects, which are generally subject to strict processing timelines to secure funding. A delay in implementation of this provision could threaten an 100% affordable housing project’s ability to move forward and could, as a result, threaten the City’s ability to meet its RHNA allocation goals. Background State Density Bonus Law The State legislature’s stated purpose of the SDBL is to allow public entities to reduce or even eliminate subsidies for housing projects by allowing a developer to include more total units in a project than would otherwise be allowed by the local zoning ordinance in exchange for affordable units, and to cover at least some of the financing gap of affordable housing with regulatory incentives, rather than additional public subsidy. The additional units granted under SDBL are referred to as a “density bonus”, and the regulatory incentives include “incentives or concessions”, and “waivers or reductions of development standards”. 10.D Packet Pg. 496 4 of 9 For purposes of SDBL, “development standard” includes, but is not limited to, a height limitation, a setback requirement, a floor area ratio or parcel coverage limitation, an onsite open-space requirement, or a parking requirement. Under SDBL, the City is required to grant a density bonus to any housing development project that sets aside a minimum percentage of units as affordable. The density bonus increases based on the number of affordable units set aside, with the highest density bonus for mixed-income projects being 50%. Depending on the percentage of affordable housing units in a project, developers can request up to four incentives or concessions and additionally may request waivers or reductions of development standards. The City may only deny a request for regulatory incentives based on certain findings. Specifically, to deny an incentive or concession, the City is generally required to demonstrate that the incentive or concession would not result in identifiable and actual cost reductions to provide for affordable housing, and to deny a request for a waiver or reduction of a development standard, the City is generally required to demonstrate that the waiver or reduction would not physically preclude the developer from constructing the project. AB 1763 On October 9, 2019, the Governor of California signed 18 bills into law to stimulate housing production, including Assembly Bill 1763, which amends the SDBL to provide for increased density bonuses and incentives and concessions for 100% affordable housing developments. For purposes of SDBL, a 100% affordable housing development is defined as a housing project with 100% of all units in the development for lower income households, except that up to 20% of the units in the development, including total units and density bonus units, may be for moderate-income households. Under AB 1763, 100% affordable housing developments are automatically granted a density bonus equal to an 80% increase in units and up to 4 incentives or concessions. 10.D Packet Pg. 497 5 of 9 In addition, if the 100% affordable housing project is within one-half mile of a major transit stop, the City is required to grant the housing development unlimited density and a height increase of up to three additional stories, or 33 feet. Although the City is required to grant the project “unlimited density”, the City is still able to limit the height of the project to 33 feet or three stories above the maximum for the applicable zoning district. Unlimited density in this context means that the City cannot place a limitation on the number of affordable units that fit within the building envelope. However, AB 1763 also declared that 100% affordable housing developments that received unlimited density could not request additional waivers or reductions of development standards. City’s Implementation of AB 1763 AB 1763 became effective on January 1, 2020. On September 8, 2020, the City Council adopted Ordinance Number 2649 (CCS), which, in part, updated Santa Monica Municipal Code (SMMC) Chapter 9.22 to incorporate updates made by AB 1763. In accordance with AB 1763, Santa Monica Municipal Code Section 9.22.070(C) prohibits a developer to request additional waivers or reductions of development standards for 100% affordable housing developments that received unlimited density. AB 2345 In order to further encourage the development of 100% affordable housing projects, the State legislature passed Assembly Bill 2345, which became effective on January 1, 2021, and expressly authorizes cities to grant additional waivers or reductions to development standards that were formerly prohibited under Assembly Bill 1763. Consequently, the City now has the option to grant the additional waivers or reductions that the City determines is necessary to allow the construction of 100% affordable housing projects. No additional height is allowed for these projects. During this interim period, staff will further research whether the City can limit the categories of waivers or reductions of development standards that an 100% affordable housing project applicant can request. 10.D Packet Pg. 498 6 of 9 Discussion Under SMMC Chapter 9.22, and in accordance with SDBL, the City is required to grant unlimited density and up to three stories or 33 feet in height when requested for 100% affordable housing developments located within a ½ mile of a major transit stop (see Figure 1). In addition, those housing development projects may request up to four additional incentives or concessions, but no waivers or reductions of development standards. Figure 1: Map of Areas within ½ mile of a Major Transit Stop By adopting the proposed Emergency IZO, the City would agree to allow developers to, in addition to what is already required by SDBL, request additional waivers and reductions in development standards. 10.D Packet Pg. 499 7 of 9 The proposed IZO would not allow a developer to request additional height beyond the additional 3 stories or 33 feet that the City is already required to grant under SDBL. Waivers are generally requested to modify development standards such as setbacks, stepbacks, parcel coverage or floor area, and open space requirements, but can only be used if the development standard would physically preclude the development of the project at its permitted density and with any incentives or concessions granted. The proposed Emergency IZO would only grant developers of 100% affordable housing projects that receive unlimited density the ability to request waivers or reductions of development standards. Any request for a waivers or reductions would not be automatically granted. The proposed Emergency IZO would not affect the City’s discretion to deny a developer’s request for waivers or reductions of development standards, such as when denial of the requested waiver or reduction of a development standard would not have the effect of physically precluding the construction of the 100% affordable housing project. If the City is able to make the findings set forth in SDBL, then the City may deny a request for a waiver or reduction of development standards. The Planning Commission has been conducting discussions on implementation of the 6th Cycle Housing Element, and it is anticipated that the Commission will make a formal recommendation to the City Council in January 2023. If the Planning Commission makes a formal recommendation in January 2023, any changes to Chapter 9.22 to implement Program 2D would not be presented to Council before February 2023, with a likely effective date of April 2023, if adopted by Council in February 2023. Based on this anticipated timeframe, the adoption of this Emergency IZO provides an opportunity for 100% affordable housing projects to be eligible for a wider range of assistance to make qualifying projects feasible, as authorized by SDBL. More specifically, the combination of SDBL-authorized development incentives and concessions and ability to request waivers supports the development of 100% affordable housing projects. This is particularly important, given the challenges with funding 100% affordable housing projects, which often necessitates the use of financing sources such as tax credits that establish a strict schedule for obtaining entitlements and building permits. A delay in agreeing to waivers or reductions of development 10.D Packet Pg. 500 8 of 9 standards before the anticipated effective date for implementation of Program 2D in the Spring of 2023, could jeopardize the production of 100% affordable housing developments within the city as well as the City’s ability to meet its RHNA allocation goals. If adopted, the proposed Emergency IZO would take effect immediately for an initial period of 60 days, subject to extension by the City Council in accordance with Santa Monica Municipal Code Section 9.46.090(C). Environmental Review The proposed adoption of an Emergency IZO to allow a request for waivers of development standards in conjunction with a 100% affordable housing project utilizing State Density Bonus Law provisions was analyzed as part of the 2021-2029 6th Cycle Housing Element Environmental Impact Report (EIR) [SCH No. 20212269242021] that was certified by Council on October 12, 2021, with an Addendum to the EIR approved on October 11, 2022. This approval of an Emergency IZO implements a portion of that 6th Cycle Housing Element project. An analysis has been performed pursuant CEQA Guidelines § 15162 to determine whether subsequent environmental review is required for the adoption of an Emergency IZO to allow a request for waivers of development standards in conjunction with a 100% affordable housing project utilizing State Density Bonus Law provisions. Based upon this analysis, the following findings are made to support the determination that no subsequent environmental review is required: 1) No substantial changes are proposed in the project which will require major revisions of the previous EIR and Addendum due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects. In this case, there are no changes to the project. 2) No substantial changes occur with respect to the circumstances under which the project is undertaken which will require major revisions of the previous addendum due to the involvement of new significant environmental effects or a 10.D Packet Pg. 501 9 of 9 substantial increase in the severity of previously identified significant effects. In this case, no substantial changes have occurred. 3) There is no new information, which was not known and could not have been known at the time of the previous EIR and Addendum that the project will have significant effect not discussed in the EIR and Addendum. Based upon these findings, it has been determined that no further environmental documentation is required for this project. Past Council Actions Meeting Date Description 10/11/2022 (Attachment B) Adoption of Resolution Amending the 6th Cycle (2021-2029) Housing Element to the City’s General Plan and Approval of Addendum to the Final Environmental Impact Report for the 6th Cycle (2021-2029) Housing Element Financial Impacts and Budget Actions There is no immediate financial impact or budget action necessary as a result of the recommended action. Prepared By: Roxanne Tanemori, Principal Planner Approved Forwarded to Council Attachments: A. Attachment A EIZO Density Bonus for Affordable Housing 121322 B. Attachment B Link to 10-11-2022 Council Meeting 10.D Packet Pg. 502 1 City Council Meeting: December 13,2022 Santa Monica, California ORDINANCE NUMBER _____ (CCS) (City Council Series) AN EMERGENCY INTERIM ZONING ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA TO UPDATE DENSITY BONUS REQUIREMENTS FOR 100% AFFORDABLE HOUSING DEVELOPMENTS WHEREAS, the State is experiencing a housing supply crisis, with housing demand far outstripping supply; and WHEREAS, the housing crisis has particularly exacerbated the need for affordable homes at prices below market rates; and WHEREAS, the housing crisis has resulted in increased poverty and homelessness, especially first-time homelessness, forced lower income residents into crowded and unsafe housing in urban areas, and forced families into lower cost new housing in greenfields at the urban-rural interface with longer commute times and a higher exposure to fire hazard; and WHEREAS, California needs an estimated 180,000 additional homes annually to keep up with population growth, and the Governor has called for 3.5 million new homes to be built over a 7-year period; and WHEREAS, the City of Santa Monica has long been committed to ensuring that Santa Monica is an inclusive and affordable community despite mounting market pressures; and 10.D.a Packet Pg. 503 Attachment: Attachment A EIZO Density Bonus for Affordable Housing 121322 (5467 : Emergency IZO Regarding State Density Bonus 2 WHEREAS, the City’s Land Use and Circulation Element, adopted in 2010, and Zoning Ordinance, adopted in 2015, demonstrate this commitment through providing extra bonuses and incentives for one hundred percent affordable housing; and WHEREAS, on October 9, 2019, the Governor signed 18 bills into law to stimulate housing production, including: AB 1763, which amends the State Density Bonus Law, California Government Code Section 65915 et seq. (“SDBL”), to provide for increased density bonuses and incentives and concessions for housing developments that contain one hundred percent of all units in the development, including total units and density bonus units, but exclusive of a manager's unit or units, are for lower income households, except that up to 20 percent of the units in the development, including total units and density bonus units, may be for moderate-income households (“100% affordable housing developments”); and WHEREAS, AB 1763, in part, provides that the City may not impose maximum controls on density on 100% affordable housing developments located within one-half mile of a major transit stop, and that those 100% affordable housing developments shall receive shall also receive a height increase of up to three additional stories, or 33 feet; and WHEREAS, AB 1763 further provides that 100% affordable housing developments that received unlimited density are not eligible for additional waivers or reductions of development standards; and 10.D.a Packet Pg. 504 Attachment: Attachment A EIZO Density Bonus for Affordable Housing 121322 (5467 : Emergency IZO Regarding State Density Bonus 3 WHEREAS, on September 8, 2020, the City Council adopted Ordinance Number 2649 (CCS) which, in part, incorporated provisions of AB 1763, including the prohibition against waivers for 100% affordable housing developments that receive unlimited density; and WHEREAS, AB 2345, which became effective on January 1, 2021, amended the SDBL to allow a city to authorize a developer to request additional waivers or reductions of development standards for 100% affordable housing developments that receive unlimited density; and WHEREAS, the City received a Regional Housing Needs Assessment (“RHNA”) allocation for is 6th Cycle (2021-2029) Housing Element (“6th Cycle Housing Element”) of 8,895 housing units, with approximately 70 percent allocated as affordable housing; and WHEREAS, this RHNA allocation will require the City to permit approximately 1,000 housing units annually between 2021 and 2029, 700 of which are required to be affordable housing, representing an increase of approximately five times over the City’s RHNA allocation for the 5th Cycle (2013-2021) Housing Element; and WHEREAS, on October 11, 2022, the City Council adopted Resolution Number 11469 (CCS), adopting an amended 6th Cycle Housing Element, which was certified by the State on October 14, 2022; and WHEREAS, the 6th Cycle Housing Element represents the City’s longstanding commitment to affordable housing, tenant protection, housing and services for special needs groups, homeless services, sustainable development, and fair housing; and 10.D.a Packet Pg. 505 Attachment: Attachment A EIZO Density Bonus for Affordable Housing 121322 (5467 : Emergency IZO Regarding State Density Bonus 4 WHEREAS one of the four key principles of the 6th Cycle Housing Element is to increase housing production for all, with an emphasis on affordable housing; and WHEREAS, through Housing Element Program 2D, the City has committed to updating its density bonus ordinance to ensure consistency with SDBL and integration into the City’s land use system no later than October 15, 2023; and WHEREAS, on August 4, 2021, the Planning Commission adopted Resolution Number 21-007 (PCS) declaring its intention to consider recommending to the City Council that the City Council amend the text of the Zoning Ordinance for consistency with the goals, policies, and programs set forth in the 6th Cycle Housing Element, including Program 2D; and WHEREAS, the Planning Commission has been conducting discussions on implementation of the Housing Element, and it is anticipated that the Commission will make a formal recommendation to the City Council in January 2023; and WHEREAS, if the Planning Commission makes a formal recommendation to the City Council in January 2023, it is anticipated that amendments to the Zoning Ordinance to implement Program 2D would not be presented to Council before February 2023, with a likely effective date of April 2023; and WHEREAS, agreeing to additional waivers or reductions of development standards for 100% affordable housing developments that receive unlimited density will facilitate the development of affordable housing within the City, consistent with the key principles of the 6th Cycle Housing Element and Program 2D; and 10.D.a Packet Pg. 506 Attachment: Attachment A EIZO Density Bonus for Affordable Housing 121322 (5467 : Emergency IZO Regarding State Density Bonus 5 WHEREAS, 100% affordable housing projects, with challenges in available funding, often turn to financing sources such as tax credits, which establish a strict schedule for obtaining entitlements and building permits; and WHEREAS, if the City does not agree to waivers or reductions of development standards before the anticipated effective date for implementation of Program 2D in the Spring of 2023, it could jeopardize the production of 100% affordable housing developments within the City as well as the City’s ability to meet its RHNA allocation goals; and WHEREAS, there exists a current and immediate threat to the public health, safety and welfare due to the State’s ongoing and unprecedented housing crisis, which has resulted in the City’s RHNA allocation that heavily focuses on affordable housing production; and WHEREAS, the City desires to immediately agree to waivers or reductions of development standards for 100% affordable housing developments that receive unlimited density; and WHEREAS, adoption of this emergency Interim Zoning Ordinance is necessary to preserve public peace, health, safety and welfare as it will remove barriers to production of housing, particularly 100% affordable housing developments. NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. Interim Zoning Regulations. Notwithstanding anything to the contrary in Santa Monica Municipal Code Section 9.22.070(C), a housing development that receives a waiver from any maximum controls on density pursuant to Santa Monica 10.D.a Packet Pg. 507 Attachment: Attachment A EIZO Density Bonus for Affordable Housing 121322 (5467 : Emergency IZO Regarding State Density Bonus 6 Municipal Code Section 9.22.050(B)(3)(d)(ii), and up to three additional stories or 33 feet in height in accordance with 9.22.060(A)(4), shall be eligible for, and may receive, additional waivers or reductions of development standards in accordance with the provisions of SDBL and Santa Monica Municipal Code Chapter 9.22. SECTION 2. Any provision of the Santa Monica Municipal Code or any appendix thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance. SECTION 3. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional. SECTION 4. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. This Ordinance shall become effective immediately upon adoption. Pursuant to Sections 615 and 619 of the City Charter, and Section 9.46.090 of the Municipal Code, for the reasons stated in the recitals above, the staff report accompanying this ordinance, oral and written testimony received by the City Council, and City Council discussion, the City Council declares this ordinance to be necessary as an emergency measure for preserving the public peace, health, and safety, 10.D.a Packet Pg. 508 Attachment: Attachment A EIZO Density Bonus for Affordable Housing 121322 (5467 : Emergency IZO Regarding State Density Bonus 7 with the result that this ordinance shall be introduced and adopted at the same meeting and shall become effective immediately upon its adoption. SECTION 5. This Ordinance shall be of no further force or effect sixty days from its effective date, unless it is otherwise extended pursuant to Santa Monica Municipal Code Section 9.46.090(C). APPROVED AS TO FORM: _________________________ DOUGLAS SLOAN City Attorney 10.D.a Packet Pg. 509 Attachment: Attachment A EIZO Density Bonus for Affordable Housing 121322 (5467 : Emergency IZO Regarding State Density Bonus Attachment B Link to the October 11, 2022 City Council: Adoption of Resolution Amending the 6th Cycle (2021-2029) Housing Element to the City’s General Plan and Approval of Addendum to the Final Environmental Impact Report for the 6th Cycle (2021-2029) Housing Element https://santamonicacityca.iqm2.com/Citizens/Detail_LegiFile.aspx?Frame=&MeetingID= 1320&MediaPosition=&ID=5191&CssClass= 10.D.b Packet Pg. 510 Attachment: Attachment B Link to 10-11-2022 Council Meeting (5467 : Emergency IZO Regarding State Density Bonus Provisions for 100%