R-7172 (2)
EXHIBIT 1
RESOLUTION NO. 7172
(CCS)
(C1ty Councll Series)
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF SANTA MONICA
INITIATING PROCEEDINGS TO CONSIDER
AMENDMENTS TO PROGRAM 12 OF THE
HOUSING ELEMENT OF THE GENERAL PLAN
WHEREAS, the Planning Commisslon of the City of Santa Monlca
has requested the Clty Councll to lnltlate proceedings to
conslder amendments to Program 12 of the Houslng Element of the
General Plan,
NOW, TrlEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOE3 RESOLVE AS FOLLOWS:
SECTION 1. The Clty Councll authorizes the Plannlng
CommissIon to lnltlate proceedlngs to conslder amendments to
Program 12 of the Housing Element of the General Plan.
SECTION 2. The City Clerk shall certify to the adoptlon of
thlS Resolutlon, and thenceforth and thereafter the same shall be
10 full force and effect.
APPROVED AS TO FORM:
~~.~-~
ROBERT M. MYERS 0
Clty Attorney
Adopted and approved thlS 25th day of February, 1986.
IlJA ~J~
/!". VMtlY'(JTempo(j'
I hereby certlfy that the foregol~g Resolutlon No. 7172(CCS)
was duly adopted by the Clty Cou~cll of the Clty of Santa MO~lca
at a meetlng thereof held 01'} February 25, 1986 by the followlng
Counell vote:
Ayes: CouYlcllmembers: COl'}1'1, Epsteln, A. Katz, H. Katz,
Zane a'1d Mayor Pro Tempore Jenn1ngs
Noes: Councllmembers: None
Abstain: COU!1cllmembers: NO'1e
Absent: Councilmembers: Mayor Reed
ATTEST:
~~,~
CIty Clerk
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EXHIBIT 2
DRAFT PROPOSAL FOR A
REVISED PROGRAM 12 OF THE
SANTA MONICA HOUSING ELEMENT
Prepared by
Plannlng Divlslon
C~ty of Santa Monlca
July 1986
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PROGRAM 12: DEVELOP AN INCLUSIONARY ZONING PROGRAM
OBJECTIVE:
PROMOTE DEVELOPMENT OF HOUSING AFFORDABLE TO LO~ AND
MODERArE INCOME PERSONS.
DESCRIPTION:
The Clty shall adopt an lncluslonary zonlng program. The
Incluslonary requ1rement shall apply to all market rate houslng
whether resulting from new constructlon or market rate converSIon
of apartment units, except that projects involvlng four unlts or
less snaIl be exempt from the program, and converSlon projects
approved under the provlslons of ArtIcle XX of the CIty Charter
shall also be exempt from the program.
The lncluslonary program shall requlre that flfteen percent
(15%) of all new unIts in each market rate nouslng proJect be
affordable to persons wlth lncomes up to 100% of the Los Angeles-
Long Beach prlmary Metropollt.an Statlstlcal Area medlan lncome.
The CIty shall, by orcllnance, provlde for satlsfactlon of thlS
lncluslonary
reqUIrement by provlSlon of on-slte houslng,
off-slte houslng, or an In-!Ieu fee to be paId to the Clty. The
developer shall have a chOIce of the metnod to satlsty the
lncluslonary requ1rement.
In-lleu fees, subJect to Increases to recognlze the effect
of Inflation, shall be establlshed as one method for satlsfYIng
tne lncluslonary program.
The In-lIeu fee formula shall be
establlshed wlth due regard to the Clty'S ablllty to obtaln the
benefl ts of State mandated dens I ty bonuses.
The In-lleu fee
scheaule must also be falr and economlcally feaslble.
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All on-Sl~e and off-slte lncluslonary unlts shall be
affordable to households ranglng up to 100% of the Los Angeles-
Long Beach Prlmary Metropol1tan Stat1stlcal Area medlan lncome.
The City shall encourage the provls1on of unlts wlth an
approprlate number of bedrooms and otner features so as to best
meet the needs of senlor clt1zens, large famIlies, dlsabled
persons, and persons wlth othcr spccIal needs.
Incluslonary unlts produced on-slte shall be ownershlp unlts
in ownershlp bUIldlngs, and rental un1 ts 1n rental bUlldlngs.
All Incluslonary unl~S shall be subJect to controls to maIntaIn
affordablllty.
The relevant provl3Ions of State law, lncludlng Government
Code sectlon 65915-65918, shall be compiled wlth 1n the develop-
ment of the lncluslonary hOUSIng ordlnance.
IMPLEMENTATION:
Responsible Agency: Communlty and EconomlC Development
Cost: No slgnlflcant cost.
Staffing: EXlstlng staff sufflClent.
Funding: Clty General Fund, In-Ileu fee revenue.
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SChedule: I.
Quantified
I.pact:
Increase
10
new
affordable
hOUSIng.
.
Estlmated potentlal addltlon of 5 to 25 lncluslonary unlts per
year.
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EXHIBIT 3
OUTLINE OF INCLUSIONARY PROGRAM COMPONENTS
1. ThlS outlIne detaIls potential elements of an lncluslonary
lmplementatlon program.
2. Definitions. The lncluslonary program should consider the
following deflnltlons.
a. Ellglble Purchaser: A household WhICh is qualifIed by
the CIty or Its desIgnee, accordIng to procedures
establlshed by the Clty, as meetlng the reqUIrements of
thIS chapter for tne purchase of affordable unIts; or
an entIty provldlng affordable hOUSIng.
b. ROllS lng Author I ty: Hous lng Author 1 ty of the Cl ty of
Santa MonIca, a non-proflt public corporatIon.
c.
Houslng Costs: The monthly mortgage's prlnclpal and
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lnterest, property taxes, homeowners lnsurance, and
condomInIum fees, where applIcable,
for ownershlp
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unltSj and the monthly rent for rental unlts.
d. HUD: The UnIted State Department of HOUSIng and Urban
Development or its successor.
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e. Incluslonary Unlt: An ownershIp or rental houslng unit
as required by thlS OrdInance, WhlCh IS affordable by
households wlth low or moderate lncome.
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f. Income Ellglbl1lty: The gross annual household lncome
conslder lng household Slze and number of dependents,
lncome of all wage earners, elderly or dlsabled famIly
members and all other sources of household lncome.
g. In-Lleu Fee: A fee paId to the CIty by developers
subJect to thIS ordlnance In-lleu of provlding the
requlred lnclus~onary un~ts.
h. Market Rate UnIt: A dwelllng unIt which is not sUbJect
to the rental, sale or resale regulatIons of thIS
chapter.
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"Moder a te" ,
and
"Low"
Income
Levels: DetermIned
perlodlcally by the CIty based on the U. S. Department
of Houslng and Urban Development estlmate of med~an
lncome ln Los Angeles-Long Beach pr lmary Metropol ~ tan
Stat~stIcal Area. The two maJor Income categorIes are
deflned as follows:
"Moderate Income" - 81% to 100% of the area medlan.
"Low Income" - 80% or less of the area medIan.
Further adJustment shall be made by household Slze as
establlshed by Clty admInistratIve gUldellnes.
J. Off-Slte Constructlon: Erectlon of low or moderate
lncome housIng unIts on land other than that on WhlCh
the developer intends to place unIts wlthln the CIty of
Santa Monlca.
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k.
ProJect:
proposal
sought.
A residentlal development or land subdlvls10n
for WhlCh City permlts and approvals are
1. Resale Controls: Legal restrlctlons by WhlCh the prlce
of lnclusionary unIts will be controlled to insure that
the unlt lS affordable by low or moderate income County
households over tlme.
3. Applicability. The lncluslonary requlrement shall apply to
all multl-famlly reSlaentlal market rate housIng unlts
resultIng from new constructlon or market rate condoffilnlum
or cooperatlve converSlon of proJects of fIve unlts or more.
The constructlon of any multIple dwelling lntended as rental
housing for persons and families of low or moderate lncome
or for senIor cltlzens, WhlCh IS flnanced by any federal or
state housIng asslstance or owned by any relIgious or other
non-proflt organlzatlon shall be exempt from these
requlrements.
4. Project Development Requirements.
a. No less that flfteen percent {15%} of the total number
of units to be constructed pursuant to any proJect
developed by an appllcant at one locatlon, whether at
thlS time or ln the future, designed for permanent
occupancy and contalnlng five (5) or more unlts shall
be affordable by households of low- or moderate-lncome.
The requIrements of thlS sectlon may also be satlsfled
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by off-site development of required unlts as descrlbed
In Section 4F, or an In-l leu fee payment pursuant to
the provlslons of Section 5.
b.
In determining
the
number
of
Incluslonary
unlts
required, any decimal fractlon less that 0.5 shall be
rounded down to the nearest wnole number, and any
deClmal fractlon of 0.5 or more shall be rounded up to
the nearest wnole number.
c. Pt ;:""= tHile tn:- :.1_.)3 are suomltted to the City's
Planning DIV1Slon for
Initial
reVlew the proJect
proposal shall speCify the number, type, location, Slze
and constructlon scheduling of any dwelling unlts to be
developed and shall Indlcate which unlts are proposed
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for rental or ownership for the purpose of satlsfYlng
the lncluslonary hOUSing requirement.
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d.
If located on the proJect slte, lncluslonary units
shall, whenever reasonably pOSSible, be dlstrlbuted
throughout the proJect.
The applicant may reduce both
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the size and amenl ties of the lncluslonary unl ts as
long as there are not slgnlflcant ldentlflable dlffer-
ences ln the unl ts v 15 lble from the exter lor and the
.
Slze and deSign of the units are reasonably conslstent
with the rest of the proJect, prOVided that all units
conform to the requirements of the applicable bUilding
.
and hOUSing codes.
Incluslonary units provlded shall
have at least the same number of bedrooms as the
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average market rate unlt ln the proJect and If not the
same as the market rate unlts, shall be sUbJect to the
followlng mInImum Slze 11mIts:
0 Bedrooms 500 Square Feet
1 Bedroom 600 Square Feet
2 Bedrooms 900 Square Feet
3 Bedrooms 1,100 Square Feet
4 Bedrooms 1,300 Square Feet
All incl us lonary unl ~s 1n a pr oJ ect and phases of a
proJect shall be constructed concurrently with the
constructIon of market rate unlts.
e. Incluslonary unlts developed on the project site shall
be of the same tenure type as the proJect's market rate
houslng unIts.
f. Requlred incluslonary unIts may be provlded at a
locatIon wlthln the Clty other than the proJect SIte.
Any such off-slte unlts shall be completed prIor to the
...
Issuance of a Certlflcate of Occupancy for the market-
r ate hOUSIng unl t pro) ect and shall conform to the
requlrements of the applIcable bUllding and houslng
codes and the mlnlmum SIze provlSlons cited in Sectlon
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4d.
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5. In-Lieu Fees.
a. Fees J.n lleu of constructlon of requlred lnclusJ.onary
unl ts may be pa1d to the Cl ty. These in-lleu fees
shall be used by the Clty for the purpose of developlng
affordable houslng prlmarlly for low-lncome households
elsewhere In the City. Up to twenty-flve percent of
in-lleu fee funds may be used to develop affordable
housing for moderate-lncome households, and up to
flfteen percent of In-lieu fee funds may be used for
program admlnlstratlon costs.
b. In-l1eu fees shall be $3.00 per square foot of adJusted
floor area of the proJect for the f1rst 10,000
square feet, and $ 4.00 per square foot of adJ usted
floor area above 10,000 square feet. The floor area of
any on-s 1 te incluslonary unl ts shall be excluded from
the floor area calculatlon. Any fee pursuant to thlS
Sectlon shall be adJusted for lnflatlon by the
percentage change ln the Consumer Prlce Index ("Cpr")
between the date of adoptlon of an lncluslonary
ordlnance through the month in which payment lS made.
For purposes of thlS Sect10n, CPI shall mean the index
for Urban Wage Earners and Clerlcal Workers for the Los
Angeles/Long Beach statlstlcal area, as publ ished by
the Unlted States Department of Labor, Bureau of Labor
StatlstlcS.
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c. The in-lleu fee shall be due ln full pr J.or to the
issuance of a CertlfJ.cate of Occupancy for the proJect.
Payment of th1s fee shall be secured by executlon of an
J.r revocable letter of credl t In favor of the Cl ty or
other secur 1 ty acceptable to the Ci ty for the total
amount of the obllgation. The letter of credl t or
other acceptable secur 1 ty shall be dellveIed to th2
City pIlor to the lssuance of a bUlldlng permlt for the
development.
d. Any in-11eu fees collected by the Clty shall be used to
provlde hous1.ng ln Santa Monlca for low-lncorne
households.
6. Fee Waivers. The Condominlum and Cooperatlve Tax descrlbed
1n Sectlon 6651 of the MunIclpal Code shall be walved for
requlred lncluslonary unlts which are developed and low and
moderate lncome unlts developed by the Clty or ltS deslgnee
uSIng in-lleu fee funds. The Park and Recreat10n Facllltles
Tax descrlbed in Chapter 6C of the Munlclpal Code shall be
walved for requIred incluslonary units WhICh are developed
and low and moderate lncorne unlts developed by the City or
its deslgnee using in-lleu fee funds.
7. Density Bonus and Other Incentives. ApplIcable projects may
be entItled to density bonuses or other incentlves, pursuant
to the requlrements of State law.
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8. pricin9 Re~uirements for Inclusionary Units. All incluslon-
ary un1ts shall be rented or sold to households that quallfy
unoer tne terms of Sect10n 10. Requlred lncluslonary unlts
shall be pr1ced so that des1gnated households pay no more
than thirty percent (30%) of gross monthly household income
for rent 1n rental unl ts or thl r ty-f1ve percent (35%) of
gross monthly lncome for houslng cost 1n ownershlp units.
The C1ty shall, on an annual basls, set allowable rents and
carrYlng charges for incluslonary un1ts, adJusted by number
of bedrooms. Requlred lncluslonary un1 ts Wh1Ch are owner-
Shlp unlts shall be sold at a prlce equal to or less than a
CIty calculat10n WhlCh assumes 30% of gross monthly
household 1ncome 15 spent for prlnc1pal and lnterest
payments, a thlrty year loan term, and an 1nterest rate
wh1ch reflects market condl t10ns. The lnterest rate
component of the formula shall be adJusted annually by the
Cl ty, or on a more frequent basls if the City deems 1 t
necessary. Down payment shall be equal to or less than ten
percent (10%) of the sales prlce. No charge or fee shall be
lmposed on the purchase of an incluslonary unit which 1S In
addit10n to or more than charges imposed upon purchasers of
market rate unlts. The proJect owners shall retaln
discretlon in the selectlon of ellglble renters or buyers
provlded that such renters or buyers meet requIrements of
Sect10n 9.
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9. Eligibility Requirements. Only 10w- and moderate-lncome
households shall be ellg ible to occupy incluslonary uni ts.
The Clty may establlsh admlnlstrative gUldellnes for
determlnlng household lncome, IDlnlmum and maXlmum occupancy
standards and other ellglblllty crIterla.
a.
Confllct of Interest.
Followlng are those lndlviduals
who, by vlrtue of thelr posltlon or relatlonshlp, are
found to be lnellglble to purchase or rent an
affordable unlt as theIr resldence:
(1) All employees and offlclals of the City of Santa
Monlca or ltS agencIes, authorltles or comm1SSlons
who have, by the authorIty of theIr posltlon,
polley-makIng authorlty or influence affect1ng
Clty houslng programs.
(2) The lmmedlate relatlves, employees, and anyone
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galnlng slgnlflcant economlC beneflt from a dIrect
buslness associatIon WIth publlC employees or
offlclals.
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b. In settlng prlorltles among ellgible households, the
appll.cant, owner, or Cl ty shall generally g lve fir st
pr lor 1 ty to Santa Monlca residents, second to persons
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employed ln Santa Monlca, and third to other persons.
10. Relation to Units Required by Rent Control Board. Low and
.
moderate lncome unlts developed as part of a market-rate
project, pursuant to replacement requlrements of the Santa
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Monlca Rent Control Board shall not count towards the
satlsfactlon of thlS program.
New incluslonary units
requ~red by the Rent Control Board and meetlng the standards
of th~s program shall count towards the satlsfactlon of th1s
program.
11 . Deed Restr ictions. Pr 10 r to iss uanc e of a bu 11 d lng pe rm 1 t
for a project subJect to these requ~rements, the appl~cant
shall submit for C~ty rev~ew and approval deed restrlctlons
or other legal instruments settlng forth the obl~gatlons of
the appllcant under th15 program.
Such re5trlctlons shall
be effectlve for f~fty years.
12. Availability of Government Subsidies. It 15 the lntent of
th1S program that the requ1rements for lncluslonary unl ts
shall not be determined by the ava1labl1l ty of federal or
state houslng subs1d1es. Th1S is not meant to preclude the
use of such programs or subs~dles.
13. Enforcement. The provislons of thlS program shall apply to
all agents, successor sand asslgnees of an appllcant once
only for development of the Sl te.
No buildlng permit or
occupancy permit shall be issued, nor any development
approval granted, WhlCh does not meet the requ~rements of
thIS program.
DKW:1w:k1c
prog12
08/26/86
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Exhiblt 4
INTERDEPARTMENTAL MEMORANDUM
DATE:
Kenyon Webster, Principal Planner
Ann Sew!ll, Housing Program Manage~
July 22, 1986
TO:
FROM:
SUBJECT: Economic Analysis of proposed Changes to Program 12
As directed by the City Council staff has been working on
proposed changes to Program 12 of the Housing Element, which
outlines the inclusionary zoning program of the City. One of the
proposed changes is the adoption of an ordinance providing for
the payment of a fee in-lieu of including affordable units in
market-rate development projects. In order to review the economic
feasibility and impact of the in-lieu fees proposed as part of
the changes to this program this office engaged the real estate
consulting firm of Kotin Regan & Mouchly Inc. to analyze the
impact of various fees on developments. The following summarizes
the scope, methods and findings of this analysis.
A. Scope of Analysis
Kotin Regan & Mouchly (KRM) was asked to analyze the impact of
in-lieu fees on housing developments in the city by examining the
following:
1. Conduct a survey of construction costs, market rents,
operating costs and land prices in three city neighborhoods~
"North of WilShire", "Ocean Park" and "Pico Neighborhood"; to
determine reasonable estimates of development costs and
developer profits in the city.
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2. Based on KRM's experience with feasibility analysis for
private developers, identify the m~n~mum profit margin
threshold that developers would use in determining the
feasibility of a project with various in-lieu fee
requirements.
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3. Using the above information, examine the effects of various
in-lieu fees on the financial feasibility of projects in each
of the three areas of the city.
B. Methods of Analysis
KRM first used the survey of development costs to determine the
total development costs of a model project in each of the three
neighborhoods. KRM then determined that the minimum profit margin
threshold a developer would use in determining the financial
feasibility of a project would be equal to approximately fifteen
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...
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percent (15%) of project costs, and/or a return on equity
invested of 100%. Finally, KRM ran computer models of development
projects in each of the three identified neighborhoods, using (1)
no in-lieu fee or inclusionary requirements, (2) a $3.00 per
square foot in-lieu fee, (3) a $4.00 per square foot in-lieu fee,
and (4) a $6.00 per square foot in-lieu fee.
(Note: The in-lieu fees "per square foot" were calculated on the
basis of the total square feet in the market rate housing
project. For example, a housing development with 10,000 square
feet total would have an in-lieu fee requirement of $30,000 at
the $3.00 per square foot fee level.)
C. Findings
KRM's computer analyses of development oosts and developer profit
in the "North of Wilshire", "Ocean Park", and "pica Neighborhood"
areas with a range of in-lieu fees is attached. The key findings
of this analysis are:
o There is a wide range in land prices in each of the three
neighborhoods, and even without in-lieu fees or inclusionary
requirements rental projects at the higher end of the land
price range in each neighborhood did not meet the minimum
profit margin threshold of 15%.
o At the lower end of the land price range in each neighborhood
an in-lieu fee of $4.00 per square foot on rental proj ects
results in a range of profit margins from 19.7% in the North
of Wilshire area to 15.5% in the pica Neighborhood.
o Rental proj ects are more financially sensitive to in-lieu
inclusionary fees than are condominium projects, such that an
in-lieu fee that was financially feasible for a rental
project would also be feasible for a condominium project.
In addition to KRM'S findings, staff has determined that:
o It is not administratively desirable to have in-lieu fees
that vary from neighborhood to neighborhood, or from project
to project based on land cost.
o As recommended by the Planning Commission, the Chamber of
Commerce, and other interested parties it would be advisable
to establish a lower in-lieu fee for smaller projects than
for larger projects.
Therefore, based on the analysis of the economic feasibility of a
range of in-lieu fees it is recommended that the in-lieu fee for
projects of five to nine units be $3.00 per square foot of
development, and the in-lieu fee for projects of more ten or more
units b~'$4.00 per square foot.
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KOTIN. REGAN & MOUCHLY. Jne.
Real Estate Consultants
11611 San Vicente Boulevard
SUite 700
Los Angeles, Callforma 90049
2131820.0900
M,,J M 0 RAN 0 U M
TO:
FROM:
SUBJECT:
Ann Sewill. Housing Program Manager
Allan D. Katin. Thomas R. Jirovsky and Juan C. Ling
Santa Monica Inclusionary Houslng Policy Analysis
on Development Impact
DATE:
July 16, 1986
Per your request, Kotin, Regan & Mouchly, Inc. (KRM) has analyzed the impact of
City housing requirements on a hypothetical new development of 10 resldential
units in three neighborhoods in Santa Monica; north of W11shire, Ocean Park and
Pica. In addition, KRM was asked to validate various development cost and
income assumptions (see Appendix A).
From the City's development assumptions. KRM utilized the low end of land
values. without any housing surcharges, whether inclusionary unlts or in-lieu
fee. for a baseline analysis (Run No.1 of each of the ExhibltS).
Using the baseline scenarlO, various surcharges were applied to evaluate devel-
oper profit to dlfferent exaction policies under consideration by the City.
$3 per square foot fee
$4 per square foot fee
$6 per square foot fee
(Run NO.2)
(Run No.3)
(Run No.4)
In addition. a baseline case was run at the hlgher end of indlcated land values
to indicate the sensitlvity of developer profltabllity. These results and key
assumptions are summarized in the series of exhlbits listed below for the
specific areas:
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KOTIN. RECAN & MOUCHLY Inc.
Santa Monica Inclusionary Housing Policy
July 16, 1986
Exhibits
A Apartment
B Apartment
C Apartment
o Condo
E Condo
F Condo
- North of Wilshire
- Ocean Park
- Pica
- North of Wilshire
- Ocean Park
- PieD
Summary of Findin9s
Our residual analysis was predicated on an assumed minimum developer profit
margin threshold equal to approximately 15% of project costs and/or a return on.
equity invested of 100%. These guidelines were applled to evaluate the varlOUS
exaction programs.
Exhibits A-F show that lower-end land values would allow development ln most
areas with in-lieu fees of under $4.00 per square foot.
As a part of the analysls, KRM reviewed the effects of higher land cost on
project feasibility (Run No.5). At the maximum end of the land values esti-
mated by the City, no projects would likely be developed, even without any
developer exactions. KRM believes that in-lieu fees proportional to land value
would be helpful in encouraging new development in the Pica neighborhood.
We found that external factors are more important determinants for development
than housing policy, except for the Pico area with its relatlvely low land
costs, i.e., a $6.00/square foot in lieu fee 1S equal to 25% or more of the
Pico area land cost.
Developer exactions have a greater impact on the profitabllity of apartments
versus condominiums, i.e., condominlum builders are more likely to proceed with
development since the fees are a smaller percentage of total profits.
Methodology - Rental Property
KRM utilized an in-house land residual model with minor modifications to illus-
trate the prof1tabil1ty to developers of alternative development scenarios
based upon a series of development costs and operating income and expense
assumptions. These indivldual runs are shown in Appendix B.
Utilizing a stabilized pro forma, the model calculates the project income
available for debt serV1ce and as return on equity, based on estlmated market
interest rates of 11% for long-term mortgages. Applying a 110% debt coverage
factor, a maximum mortgage amount ;s obtained. The difference between project
costs and the mortgage amount ;s imputed developer equity. To determine market
value, K~ estlmated a target annual return of 9% on investor equity by the
fifth year of operation would be acceptable. By estimating the project income
in the the fifth year of operation based on a 5% annual increase in rent
levels, the model calculates what investor equity value exists. The excess of
investor equlty over imputed developer equity is the developer proflt. KRM
belleves a proflt equal to 15% of project costs or 100% of lmputed developer
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KOTIN. REGAN & MOUCHI Y. Inc.
~anla Monlca-rncTUslonary HOuslng Polley
July 16, 1986
equity is a threshold level at which a development decision is made. The model
allowed for a denslty bonus for inclusionary units where appropriate. or de-
ducted an In-Lieu Fee as a development cost.
Methodology - Condominiums
KRM has utilized a different in-house land residual model to illustrate the
developer profitability from condominium development. ThlS model calculates
net proceeds from sale of the units to individuals and deducts all relevant
construction, interest, marketing and overhead costs to determlne developer
profit. Again. KRM believes a threshold profit"target would be 15%.20: of
project costs. Proposed In-lieu Fees were added as an up-front development
cost to measure the impact on profitability.
Attachments
Appendix A - Data Input Considerations Memo
Appendix B - Land Residual Model Run
A-I to A-5
8-1 to 8-5
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Santa Monlca Inclusionary Houslng Policy
Ju 1y 16~ 1986
APPENDIX A
SANTA MONICA HOUSING POLICY ANALYSIS
DATA INPUT CONSIDERATIONS
LAND RESIDUAL MODEL
This Appendix documents the key data inputs that drlve the res1dua1 land value
model. For rental housing. key inputs include:
1. direct construction costst
2. market rental incomet
3. project expenseSt andt
4. land cost to developer.
For condominium proJects. key lnputs exclude rental lncome and proJect ex-
penses. but include market sales prices.
This appendix documents the key values used in the residual analysls. Detal1ed
verifications of the inputs are a1so attached.
Direct Construction Costs
Construction cost for rental units should be slmllar for all three nelghbor-
hoods under study. KRM has assumed a medlum- to better-quallty proJect: two-
story frame and stucco with one-half level below-grade garage. Average hard
cost per rentable square foot is assumed to be $50.00. A $3.00-$5.00 prem'u~
is added to the condominlum cost to reflect a higher quallty level.
Structure Cost per square foot
Parking cost per unlt per square foot {I}
$35.00 to $40.00
$10.50
$45.50 to $50.50
Total Hard Cost
(l} Cost per space at $6.000.
Average 1.75 spaces per unlt.
Average unlt Slze of 1,000 square foot.
Rental Incomes
A brlef survey of newly-constructed rental unlts yielded the follo\/ing rental
income rates for an average two bedroom. two bath unlt:
North of Wllshlre:
Ocean Park:
Pica Nelghborhood
$1.35/sq. ft.
1.20/sQ, ft.
1. aD/sq. ft.
Santa Monica Inclusionary Housing Policy
July 16t 1986
Market rate newly constructed units are assumed to be exempt from rent control.
The expected appreciation of rental rates is an extremely lmportant factor 1n
determlning project feasibility.
Project Expenses
Based on a brlef survey of area management companies~ per square foot proJect
expenses could be as low as $2.00 on an annual basls. Because of the small
scale projects under analysis~ operating expenses should be relatively low in
the absence of large maintenance items such as Jacuzzis, pools and other pro-
ject amenities.
As a result~ KRM has used the following expenses breakdown WhlCh approxlmates
the 20% expense ratlo indicated by the Clty provided pro formas.
$0.50 per square foot flxed expenses,
$0.50 per square foot variable expenses~
6% management fee,
1.2% property tax rate.
Fixed and variable expenses include: insurance, garbage and sewer serVlces~
water, repaid and maintenance, landscaping, janlorlal serVlce, and replacement
reserves.
Land Costs
A brlef survey of land transactions in the Santa Monlca area shows an extens1ve
range of land values, and no numerical slgnlficance can be establlshed.
KRM has used figures that bracket the land values vllthln a particular area in
order to test the sensltivity of proJect feasibility to land value changes. In
all cases~ the two extremes of land values used are based on recent reported
sales, as shown below:
North of Wilshire:
Ocean Park:
Pica Nelghborhood
$45 - 75
30 45
18 - 24
Condominium Sale Prices
Second quarter 1984 through 1st quarter 1986 sales data from the Californla
Market Data Cooperat1ve show the average sales prlces for each area to be as
follows:
-eo;r.
Pr1 ce per unit
Price per s.f.
North of Wilshlre
Ocean Park
Pica Neighborhood
$175,458
142.857
165,750
$138.85
128.06
105.83
.
-
~
Santa Monica Incluslonary Houslng Policy
July 16, 19B6
For our analysis, KRM assumed an average unit slte of 1,350 square feet at
prlces ranglng from $lll/sq. ft. to $137/sq. ft., reflectlng our estlmate of
current market condltions as this sales data is limlted to unlts constructed
prlor to 1981 that are be1ng resold.
-...,..
COMMENTS AND RESPONSES
In accordance wlth the Clty'S GUldelines for the ImplementatIon
of the Cal~fornla Envlronmental Quallty Act, a publ~c reVIew
per~od on the Inltlal Study and Negatlve Declaratlon was
conducted from August 27, 1986 to September 26, 1986. NotIce
concernlng thlS matter was provlded ln the Evenlng Outlook
newspaper and by notlces maIled to over 500 persons and communlty
organizatlons. Slnce the subject of the Initla1 Study was an
amendment to the Clty'S Houslng Element, notlce was also provlded
to the State C1earlnghouse and the State Department of Houslng
and Communlty Development.
Durlng the publlC reVlew period, the Clty received wrltten
comments from the fol10w1ng persons:
-Mehrdad Amanat. Dated September 5, 1986
-Nancy J. McKee. Dated September 16, 1986
-Joe Carreras. Dated September 24, 1986
-John B. Ohanlan. Dated September 26, 1986
Each set of wrItten comments lS presented on the following pages
w1th responses immedlately following. These comments and
responses, together WIth the Inltlal Study and Negative
Declaratlon, wlll be revIewed by the Plannlng Commlsslon and City
Councll 1n con)Unctlon wlth thelr cons1deratlon of the proposed
amendments to Program 12 of the Houslng Element.
Many of the comments recelved dld not ralse envIronmental lssues.
Rather, many of the comments deal wlth economlC and polley
lssues. Only comments on potentIal envIronmental effects are
dealt wlth ln thIS Final InItlal Study. EconomlC and POllCY
issues WIll be addressed In other reports to the planning
Commiss10n and CIty Councll.
It was the concluslon of the August 1986 Initlal Study and
Negatlve Declaration that the proposed Program 12 amendments
would not result 1n a slgnlflcant effect to the enVIronment as
meant by the Callfornla Environmental Quality Act. ThIS
conclUSlon remaIns appllcable.
~-
,
SEP 0 S 19&)
MEHRDAD AMANAT
330 WII..SHIRE BI..VD
SANTA MoNICA. CA 90401
(213) 451-8060
September 5, 1986
Mr. Kenyon Webster
Santa Monica Planning Division
1685 Maln Street
Santa Monica, California 90401-3295
Dear Mr. Webster:
Thank you for sending me the notice of availability of inltia1 study. I
have studied the proposal for amending the program 12 and I hope the following
suggestions and comments will be useful in creating a more reasonable policy
for lnclusionary housing. I must say that in general thls proposal goes a long
way towards reaching this objective. ThlS is especially true for smaller
projects which were practically halted by exceSSlve inclusionary requirements.
I also feel that 15% is a much more workable requirement as long as the provisions
for a density bonus are guaranteed.
With respect to item 10 of Exhibit 3, I suggest the following to replace
the second sentence of that paragraph: HHowever, other rent-controlled units
requlred by the Rent Control Board to satlsfy requirements of a removal permit
could also satisfy the requlrements of this program if the rent levels for
these units are within the low income range.1I
As it is indicated by the analyses conducted by Kotin, Regan and Mouchly,
rental projects will be more affected by the In-1ine fees than condominium
proJects. ThlS means that the proposed program will in effect encourage con-
dominlum development by not distinguishing between the two. Such a bias does
not help the development of more affordable rental housing. In fact, apartment
development which has a smaller margin of profit is considered to be more
risky given the fear of putting newly built units under the city's restrictive
rent control law.
On the other hand, existlng rent control laws require most future res-
idential development to have on-site replacement of rental units. This means
that much of the future residential development in the city would have to be
apartments as lenders generally stay away from mix-use apartment and condo
projects.
In connectlon wlth the collection of in-lieu feest may I point out that
payment of such a sizable fee at the time of the issuance of building permit
when the funds are generally scarce may be a burden to the developers. Perhaps
payment within 60 days after occupancy would be more practical. This will
allow for the arrangement of permanent financing.
.
-
-
..
Mr. Kenyon Webster
Page Two
September 5. 1986
In the past, there has been a great deal of talk about the need for new
rental houslng. However, there is no policy to encourage development of
apartments. Charging a smaller in-llne fee mlght be a first step in this
dlrection.
Finally, any future ordiance should clearly state the conditions, if any,
for a density bonus.
Please keep me informed of any future reports or hearings.
Sincerely,
I-/j. ~
t~ehrdad Amanat
MA:pm
STAte Uf: C"'UFOllNIA.
~1."' ~.
.,
~:i;J :_.
~.
, -
~. ~
GEORGE DEUKMEJIAN, C~L~..~'
DEPARTMENT OF HOUSIj\:G AND COMMUNITY DEVELOPMENT
Division of Housing Policy
Development
921 Tenth Street
Sacramento, CA 95814
(916) 323-3176
~
W7
September 16, 1986
Mr. John Javili
City Manager
City of Santa Monica
P.O. Box 2200
Santa Monica, CA 90401-2200
Dear Hr. Javili:
RE: Review of the City of Santa Monica's Draft Housing Element
Amendment
Thank you for submitting Santa Monica's draft houslng element amendment,
received August 27, 1986, for our review. As you know, we are required to
review draft amendments and report our findings to the locality (Government
Code Section 65585(b)).
The proposed amendment makes one change to the City's adopted housing
ele~nt, adding a program to adopt an inclusionary ordinance. In a
December 3, 1985 letter, this Department expressed its opinion that the
City's current housing element is in compliance with State law. In our
opinion, the proposed amendment will not affect the current compliance
status of the City's housing element.
We commend the City for undertaking an inclusionary program, which can help
ensure that the housing needs of lower income families are addressed.
However, we urge the City not to make the program too restrictive, thereby
discouraging residential development altogether.
We hope our comments are helpful to the City and we wish you success in the
implementation of your housing program. In accordance with requests
pursuant to the Public Information Act, we are forwarding copies of this
letter t6 the persons and organizations listed below.
Mr. John Javili
Page Two
If you have any questions about our comments or would like assistance in the
implementation of your housing program, please contact Steve Boilard of our
staff at (916) 323-4475.
S1 ncere ly ,
~4:c:t.~io/
DivislOn of Housing Policy
Development
NJM: SB: bt
cc: R. Ann Siracusa, Director of Planning, Clty of Santa Monica
~Kenyon Webster, Planning Department, City of Santa Monica
Carlyle Hall, Jr., Center for Law in the Public Interest
Mark Johnson, legal Aid Foundation of Los Angeles
Jean Uke, The Commercial and Industrial Properties Association of
Santa Monica, Inc.
Manuel M. Medeiros, State Department of Justice
Bob Cervantes, Governorfs Office of Planning and Research
Tom Bannon, California Building Industry Associatlon
S~~ ~I
.... .....J
i ~"'-
Iv ~
M E M 0 RAN 0 U M
September 24, 1986
TO:
FROM:
SUBJECT:
D. Kenyon Webster, City Planning Divislon
Joe Carreras, City Houslng Commissioner
INITI~L STUDY AND HEGA1IVE DECLARATION ON PROPOSAL FOR A
REVISED PROGRAM 12 OF THE SANTA MONICA HOUSING ELEMENT
I have reviewed the Initial Study and the Negatlve Declaration for a
revlsed Program 12 of the city housing element. Your presentatlo~
explaining these documents before the Housing Commission on 9-18-86 was
helpful in understanding the scope and lmpact of proposed cha~ges to tris
program.
In general, I support the establishment of an economically feasible in-iieu
fee schedule and a more workable program (e.g., lowering t~e inclus10r.arj
percentage and increasing the exemption threshold). However. I do have
some concerns and recommendat10ns about the proposed revisions, as foilows:
1. Why was the most important element of the package of change--the
proposed in-lieu fee schedule--recommended to the Clty Council for
adoption as part of the existing program prior to the expiration of
the comment period on the economic reasonableness of the fees?
Comment: While the comment period on the proposed economic
reasonableness and impact of the In-lieu fee schedule was to close
on 9-26-86, it was adopted on an interim emergency baS1S by the Clty
Council on 9-16-86. This lIemergencyU adoptlon contradlcts your
finding of II no significant" environmental effect contained in the
Initial Study. Does this major element in Program 12 and the
associated revisions constitute a "significant" effect or not?
Recommendation: Reevaluate the finding of no signiflcant effect on
the environment.
2. The proposed fee schedule is set low, particularly for condos.
Comment: The reasonableness of the fees and the calculation of a
fair return to developers does not take into account the tax
benefits associated with real estate development. These benefits,
even with tax reform looming. are significant when compared to other
investment opportunities. Because the magnitude of the tax benefit
is difficult to assess or generalize, does not mean that it should
not be a factor in determi ni ng lleconomi c reasonableness n of the
136-4-1
Memorandum to O. Kenyon Webster
Page 2
September 24, 1986
proposed in-lieu fees. Such tax lmpact analysis has been performed
for federal housing programs by the General ACCQUntlng Offlce (GAD)
and the Department of Housing and Urban Oe~elQpment (HUD). These
tax benefits are of particular importance to apartment developers.
In additlon, the economic analysis performed by Kotin, Regan and
Mouchly, Inc. shows that a $6.00/SF in-lieu fee would provide the
~minlmum" profit standard for all apartment and condo developers ip
the three areas of the city studied for a lO-unlt type of
development. The only area where the return falls Sl1ghtly below
the minimum 15% return on investment standa~d is in the Pica
Nelghborhood (only for apartments). Yet the recommepded fee amcunt
is $4.00/SF, or 2/3rdS of what it could be 1n order to ensure a
reasonable return to the developer.
Also, the cansultlng firm of Katin, Regan and Mouchly, Inc. notes
that:
~Oeveloper exactions have a greater impact on the profit-
abillty of apart~ents vs. condom1niums, i.e., cordominium
builders are more llkely to proceed with development1s1nce
the fees are a smaller percentage of total praflts."
Since the lmpacts of exact~ons are not the same for apartments and
co~dominiums, why should the fee schedule be the same? Treating
both types of development equally favors cond~minlum developers by
making their fees lower than they should be to conform to the
feas1billty needs of apartment developers.
Recommendation: Adopt separate fee schedules for apartments and
condorriniums. Set the condomln;um fees at a h1gher rate. For
instance, the following schedule may be reasonable:
Um ts
AptS.
$4.00/S.F.
$5.00/S.F.
Condos
5 to 9
10 or more
$5.00
$6.00
3. The use of In-lieu Fee Income needs to be clarified and focused more
on helping those wi-th the greatest need.
Comment: In the outline of inclusionary housing program components,
the in-lleu fee section needs to be clarified. Item A on page 8
states that 60% of all fee income will be used to help people wlth
1
Memo to: Ann Sewlll, Housing Program Manager; From: Allar. D.
Kotin . . .; Subject: S.M. Inclusionary Housing Polley Analysls on
Development Impact, 7-16-86. P. 2.
136-4-1
Memorandum to D. Kenyon Webster
Page 3
September 24, 1986
incomes below 80% of the county median; 25% will be used to aid
people with incomes between 80-100% of the county median income and
15% will be used for administration. On the other handt item 0 on
page 9 states that 100% of the fee income will go to help those
earning below 80% of the county median income.
Because of the limited amount of money available for affordable
housing development, and the decllning amounts projected to be
available from major sources such as CnBG funds in the future, no
exaction income should be allocated for adminlstrative expenses.
The revised Program 12 description states that implementation will
result in "no significant costs" and that "existlng staff is
sufflcient." So, why is an adminlstrative fee proposed?
In-lieu fee income should be deposited in the citywide CHARP fund,
or ln some other fund that wlll obviate the need for capital fundlng
to be diverted to cover administrative exper.ses. This change would
allow at least 75% of program income to go to those pe~sons earnlng
below 80% of the county median lncome, the people with the greatest
need for affordable housing.
Reco~mendation: Clarify the use of in-lieu fee lncome by allocating
at least 75% of all funds for assistance to people earning 80% or
below the county median income and no more than 25% for people
earning between 80-100% of the county median income.
4. The proposed fee schedule provides an inadequate incentive to build
units on site.
Comment: Under the current schedule, paying an in-lieu fee is much
cheaper than building an inclusionary unit--either on or off slte.
Probably the exaction would cover no more than 1/2 the cost of
providing an affordable unit under the city.s 15% inclusionary
option. It is also a cheaper alternative than providing enough
affordable units on site to take advantage of the state1s 25%
inclusionary density bonus program.
Recommendation: The in-lieu fee schedule should be adjusted upward
to equalize the options of paying an in-lieu fee or building an
inclusianary unit.
5. The Initial Study inadequately assesses the impact of development on
the Pica Neighborhood caused by rising land values.
Comment: The economic impact consultant notes that. as land costs
rise: (1) apartment development becomes lIunprofitableu in all three
areas of the city under study (north of Wilshire, Ocean Park and the
Pice Neighborhood), and (2) condo development becomes infeasible in
all areas except the Pico Neighborhood.
136-4-1
Memorandum to D. Kenyon Webster
Page 4
September 24, 1986
Consequently, as land costs rise, development in the city may
concentrate ln the Pico Neighborhood, and favor condo development.
The average cost there of a condo is identified by the consultant to
be $165,750, hardly affordable to residents currently living in this
low income CDBG target area.
ThlS situation may accelerate gentrification in the Pico Corridor
and make It difflcult to use PNA Housing Trust Fund money for
preserving or adding to the affordable housing stock. In
particular, condo developers can afford to bid more for land.
For example, cornmunlty corporation is currently developing 22
affordable units on four sites purchased in the P1CO Neighborhood
about a year ago for $15/SF. Today, current land costs are over
$20/SF--a 33% increase! As interest rates stay low, land prices can
be expected to stay high making the cost of providing affordable
housing even more expensive than it is currently. Inclusionary fee
income 1S needed to offset these rlsing costs.
Recommendation: Provide an assessment of the Development Impact on
the Pica Neighborhood and ensure that adequate In-lieu fee income is
ge~erated to help those In need who live ln thlS lower lncome area,
and ln other parts of the City.
JC:ae
cc: Housing Commission
136-4-1
(\t:~ .:.... 1~;;.
v~ v_
-:So
GEORGE DEUKMEJIAN Governor
STATE Of CAllFORNIA~FFICE OF THE GOVERNOR
OFFICE OF PLANNING AND RESEARCH
1400 TENTH STliEET
SACRAMENTO CA 95814
(916/445-0613)
D. Kenyon Webster
City of Santa Monica
1685 Main Street
Santa Monlca, CA 90401
September 26, 1986
Subject:
Proposal for a Revised Program 12 of Housing Element
SCH# 86082706
Dea~ Mr. Webster:
1he State Clea~1nghouse sutm1 tted the above named environmental dOCUD1el'lt to
selected state agencies for review. The review period 1s closed and none of
the state agencies ha'.re couments. 'lhis lette~ acknowledges that you have
complied with the State Clearinghouse review requirements for draft
environmental documents, pursuant to the California Environmental Q.lall ty
Act.
Please call Glenn Stobe~ at 916/445-0613 if you have any questions regarding
the env1rOi:ll1:p~ntal review process. When contacting the Clearinghouse in this
matter, please use the eight digit State Clearinghouse number so that we may
~spond promptly.
Sincerely,
q;;L~7~
John B. O1an1an
Chief Deputy Direct
Office of Planning and Research
MEHRDAD AMANAT
Comment 1: Thank you for sendIng me the notIce of availabIlIty
of InItIal study. I have studIed the proposal for amending the
program 12 and I hope the following suggestIons and comments wIll
be useful In creatIng a more reasonable POlICY for Incluslonary
housIng. I must say that In general thIS proposal goes a long
way towards reachIng thIS obJectIve. ThIS 15 especIally true for
smaller proJects WhICh were practIcally halted by exceSSIve
incluslonary requIrements. I also feel that 15% IS a much more
workable requIrement as long as the prOV.lSIOnS for a densIty
bonus are guaranteed.
Response to Comment 1: Comments noted.
Comment 2: WIth respect to item 10 of ExhIbIt 3, I suggest the
following to replace the second sentence of that paragraph:
"However, other rent-controlled unIts requIred by the Rent
Control Board to satIsfy requIrements of a removal perm.lt could
also satIsfy the requIrements of this program if the rent levels
for these un.lts are wIth.ln the low Income range.
Response to Comment 2: ThIS comment does not raise an enVIron-
mental issue. POlICY aspects of thIS project wIll be addressed
in a staff report to the Planning CommIssion.
Co...ent 3: As.l t 1.5 IndIcated by the analyses conducted by
Kotln, Regan and Mouchly, rental proJects wIll be more affected
by the in-lIne fees than condominIum projects. ThIS means that
the proposed program wIll In effect encourage condominIum
- 5 -
development by not distinguishIng between the two. Such a bIas
does not help the development of more affordable rental housIng.
In fact, apartment development whIch has a smaller margIn of
proflt is consIdered to be more rIsky given the fear of puttlng
newly built units under the CIty'S restrIctIve rent control law.
On the other hand, existlng rent control laws requIre most future
resldentlal development to have on-SIte replacement of rental
unlts. ThlS means tnat much of the future resldentlal develop-
ment In the CIty would have to be apartments as lenders generally
stay away from mlx-use apartment and condo proJects.
Response to Comment 3: See response to Comment 2.
COlIIDent 4: In connection with the collectlon of in-lleu fees,
may I pOInt out that payment of such a slzable fee at the tlme of
the Issuance of buildIng permIt when the funds are generally
scarce may be a burden to the developers. perhaps payment withIn
60 days after occupancy would be more practical. ThlS wIll allow
for the arrangement of permanent fInancIng.
Response to Comment 4: See response to Comment 2.
Co...ent 5: In the past, there has been a great deal of talk
about the need for new rental housing. However, there IS no
polIcy to encourage development of apartments. Charging a
smaller In-line fee might be a fIrst step in this dIrectIon.
Response to Comment 5: See response to Comment 2.
- 6 -
Coaaent 6: Fl.nally, any future ordinance should clearly state
the COndl.tlons, if any, for a densl.ty bonus.
Response to Comment 6: See response to Comment 2.
HANCY J. MCKEE
Comment 1: The proposed amendment makes one change to the Cl.ty's
adopted housl.ng element, addl.ng a program to adopt an inclu-
slonary ordl.nance. In a December 3, 1985 letter, thl.s Department
expressed ltS oplnlon that the Cl.ty's current houslng element is
l.n cornpllance with State law. In our Opl.nlOn, the proposed
amendment wlll not affect the current compllance status of the
City's hous~ng element.
Response to Comment 1: Comments noted.
Co..ent 2: We commend the Clty for undertaklng an inclus~onary
program, which can help ensure that the houslng needs of lower
income farnllles are addressed. However, we urge the C~ty not to
make the program too restrlctlve, thereby dlscouraglng resIden-
tial development altogether.
Response to Comment 2: Comments noted.
JOE CARRERAS
Comment 1: Whlle the comment per lod on the proposed economic
reasonableness and impact of the 1n-l ieu fee schedule was to
close on 9-26-86, it was adopted on an inter1m emergency basls by
- 7 -
the Clty Councl1 on 9-16-86.
ThlS "emergency" adoption contra-
dlctS your findl.ng of "no slgnlficantf' envlronmental effect con-
talned 1n the InItIal Study. Does this major element 1n Program
12 and the assoclated revisl0ns constItute a "signlflcant" effect
or not?
Response to Comment 1: There is no contradlct1on to the Inlt1al
Study1s fInd1ng of no s1gnlficant effect on the environment. The
comment does not establlsh any nexus between adoptIon of an
interIm In-ll.eu fee schedule and any effect on the environment.
The Cl ty Counc1l's dec1s10n to adopt such a fee schedule on an
interlm basls may have been vlewed by that body as an lmportant
actlon, but such actlon does not affect the Initial Study's
concluslon of no slgnlflcant envlronmental lmpact due to the
proposed proJect.
Commen t 2 :
The proposed fee schedule is set low, partlcularly
for condos.
Response to Commen t 2 :
ThlS comment does not ralse an environ-
mental lssue. Polley aspects of thlS proJect wlll be addressed
1n a staff report to the Plannlng Comm1ss1on.
Comment 3: S1nce the lmpacts of eXactlons are not the same for
apartments and condomin1ums, why should the fee schedule be the
same? Treatlng both types of development equally favors condo-
minl.um developers by maklng the1r fees lower than they should be
.-
to conform to the feaslblllty needs of apartment developers.
Response to Comment 3: See response to Comment 2.
.
-
- 8 -
COllUllent 4: In outline of ~nclusionary housing program compon-
ents, the In-lIeu fee section needs to be clarIfIed. Item A on
page 8 states that 60% of all fee 1ncome will be used to help
people with lncomes below 80% of the county median; 25% will be
used to aid people wIth incomes between 80-100% of the county
medIan ~ncome and 15% WIll be used for admInistratIon. On the
other hand, ~tem n on page 9 state that 100% of the fee ~ncome
w111 go to help those earnlng below 80% of the county med~an
income.
Response to Comment 4: See response to Comment 2.
Comment 5: Because of the llmlted amount of money ava~lable for
affordable hous1ng development, and the declining amounts
proJected to be available from maJor sources such as cnaG funds
in the future, no exactIon income should be allocated for
admlnlstrat~ve expenses. The revIsed Program 12 descr~ptIon
states that ImplementatIon WIll result ~n "no SIgnIfIcant costs"
and that "exIstIng staff is sufflclent." So, why IS an
admInIstratIve fee proposed?
Response to Co..ent 5: See response to Comment 2.
Comment 6: In-lIeu fee Income should be deposIted in the
cItywide CHARP fund, or In some other fund that will obviate the
need for capital funding to be dIverted to cover admlnistratlve
expenses. ThIS change would allow at least 75% of program income
to go to those persons earnIng below 80% of the county medIan
income, the people with the greatest need for affordable housing.
- 9 -
Response to Co.ment 6: See response to Comment 2.
Co~ent 7: ClarIfy the use of In-l1eu fee income by allocatIng
at least 75% of all funds for assIstance to people earning 80% or
below the county medIan Income and no more than 25% for people
earnIng between 80-100% of the county med1an 1ncome.
Response to Co..ent 7: See response to Comment 2.
Comment 8: The proposed fee schedule prov Ides an Inadequate
IncentIve to bUIld un1ts on sIte.
Response to Comment 8: See response to Comment 2.
Comment 9:
development
values.
The InItIal Study Inadequately assesses the Impact of
on the PICO NeIghborhood caused by rIsIng land
Response to Comment 9: The InItIal Study adequately analyzes the
effects of the proposed changes to program 12. As ind1cated on
pages 9-27 of the InItial Study, the amount of development
antIcIpated wIth the proposed proJect w1ll not produce sIgnIfI-
cant envIronmental effects. Further, land development actIvIty
IS Influenced by a varIety of cons1deratlons which are hIghly
dynamIc such as fInancIng costs, land avaIlabIlIty, constructIon
costs, consumer demand, competItIon from other projects, zonIng
and development standards, as well as land costs. Land costs may
rIse, but generally such costs change In reaction and relation to
changes in other economIC factors such as consumer income changes
and changes 1n the cost of financing. For example, if consumers
are wIllIng to pay hIgher pr Ices for housIng, land pr Ices may
- 10 -
rlse, but houslng development wlll cont1nue to be feasible.
Glven the Slze of Santa Monica, economlC forces may produce land
price increases, but 1t 1S llkely that such increases w1ll occur
ln resldentl.al areas throughout the Cl ty, rather than focusl.ng
development actl.V1ty l.0 one part1cular area to the exclusion of
other neighborhoods. While land and housing prlce 1ncreases are
certalnly of concern ln relatlon to the City's affordable housIng
goals, the proposed changes to program 12 would not create
slgnlflcant environmental effects on any partIcular nelghborhood
of the CIty.
JOHN B. OHANIAN
COllllent 1:
The State Clear Inghouse subm1 t ted the above named
enVl.ronrnental document to selected state agencIes for rev lew.
The reView perl.od is closed and none of the state agenCIes have
comments. This letter acknowledges that you have compIled with
the State Clearinghouse reVlew reqUIrements for draft enVlron-
mental documents, pursuant to the Callfornla EnVlronmental
Quallty Act.
Response to Comment 1: Informat1on noted.
DKW: klc
prog12c
10/09/86
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