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Home My WebLink About2018-02-14 e-packet@6:00Wednesday, February 14, 2018 6:00 PM City of South San Francisco P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA Municipal Services Building, Council Chambers 33 Arroyo Drive, South San Francisco, CA Special City Council Special Meeting Agenda February 14, 2018Special City Council Special Meeting Agenda NOTICE IS HEREBY GIVEN, pursuant to Section 54956 of the Government Code of the State of California, the City Council of the City of South San Francisco will hold a Special Meeting on Wednesday, February 14, 2018, at 6:00 p.m., in the City Council Chambers, Municipal Services Building, 33 Arroyo Drive, South San Francisco, California. Purpose of the meeting: Call to Order. Roll Call. Agenda Review. Public Comments - comments are limited to items on the Special Meeting Agenda. LEGISLATIVE BUSINESS Report regarding Assembly Bill 1505, affordable housing programs in South San Francisco, and options for amending the City’s inclusionary housing ordinance. (Nell Selander, Economic & Community Development Deputy Director) 1. Adjournment. Page 2 City of South San Francisco Printed on 4/16/2018 City of South San Francisco Legislation Text P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA File #:18-93 Agenda Date:2/14/2018 Version:1 Item #:1. Report regarding Assembly Bill 1505,affordable housing programs in South San Francisco,and options for amending the City’s inclusionary housing ordinance.(Nell Selander,Economic &Community Development Deputy Director) Staff recommends that the City Council receive a presentation on Assembly Bill 1505,affordable housing programs in South San Francisco,and provide direction on updating the City’s inclusionary housing ordinance. BACKGROUND In 2017,the California State Legislature passed fifteen bills targeting the current housing crisis,many of which have implications for the City of South San Francisco (“City”).At a City Council Study Session on January 22, 2018,staff presented an update on many of these new pieces of legislation,including Housing Accountability Act reforms,changes to Housing Element law,and residential development project streamlining.This staff report and subsequent presentation to Council focuses on Assembly Bill 1505 (“AB 1505”),which gives jurisdictions the ability to require below market rate units in residential rental developments.As a result,City Council may consider revising and updating the City’s inclusionary housing ordinance. Incomes and Housing Affordability Affordable housing refers to residential units that are offered at a below market rate (“BMR”)to households earning specific incomes.Typically,affordable housing is targeted to households making less than 120 percent of the area median income.In San Mateo County,the median income for a household of four is $115,300 or $80,700 for a household of one.Attachment 1 includes a table of income levels and affordable rents in San Mateo County. The Palmer Fix AB 1505 (Bloom),also referred to as the “Palmer Fix”for the court decision it overrules,allows cities to require a portion of new market rate,rental developments to include affordable housing provided an alternate means of compliance exists,such as in-lieu fees or off-site construction.Local ordinances requiring more than 15 percent inclusionary units affordable to households earning 80 percent or less of the area median income may be reviewed by the California Department of Housing and Community Development (“HCD”)if the municipality failed to either (a)meet at least 75%of its share of the above moderate RHNA obligation,or (b) failed to submit the required general plan/housing element annual report for two consecutive years or longer.If HCD reviews the inclusionary ordinance based on condition (a)or (b),the department may require and the municipality must provide,an economic feasibility study with evidence that the ordinance does not “unduly constrain”the production of housing to support the inclusionary requirement.HCD will determine,within 90 days after the economic feasibility study has been submitted,whether the study meets the statutory standards City of South San Francisco Printed on 2/9/2018Page 1 of 8 powered by Legistar™ File #:18-93 Agenda Date:2/14/2018 Version:1 Item #:1. days after the economic feasibility study has been submitted,whether the study meets the statutory standards and demonstrates that the inclusionary requirement is economically feasible.If the study fails to so demonstrate,the municipality would be required to limit its inclusionary requirement to 15%until it can submit another economic feasibility study that meets statutory requirements. As discussed below,the City currently has an inclusionary housing ordinance that applies to for-sale residential developments.As a result of AB 1505,the City may now consider adopting an amendment to this ordinance extending the requirement to residential rental developments. Existing Conditions in South San Francisco South San Francisco has approximately 995 deed-restricted affordable housing units.Of these,92.47 percent (920)are rentals and 7.54 percent (75)are for-sale units.Most were constructed,or deed-restricted,prior to the dissolution of the South San Francisco Redevelopment Agency.Another 102 affordable housing units are currently under construction. As previously discussed in the City Council Study Session staff report dated January 22,2018,cities and counties have an assigned Regional Housing Needs Allocation (RHNA)obligation under state law,which is determined by region and states the number of housing units that each region must provide during an eight-year planning period.Each region’s planning agency will distribute the total number of housing units need across each jurisdiction within the region and specify the income levels these units must fulfill.In South San Francisco’s case,the Association of Bay Area Governments and the Metropolitan Transportation Commission serves as the planning agency and allocates the region’s RHNA obligations. For the current planning period,the City has a RHNA obligation of 1,864 units.This allocation is further divided into the following income categories: ·846 units for lower income housing, ·313 units for moderate income housing, and ·705 units for above-moderate income households. These units at each income level must be entitled between 2015 and 2023 to count towards this planning period’s RHNA share.The City is currently meeting its requirement to provide above-moderate income housing, but not its share of moderate, low, or very low income housing. To continue making progress towards meeting its RHNA obligations,the City may utilize the following mechanisms to create opportunities for and accelerate affordable housing development: ·The City can use inclusionary zoning to require affordable units in market rate developments.This mechanism is effective provided that the inclusionary requirement does not negatively impact the market to discourage private development. ·The City can use its affordable housing funds to partner with affordable housing developers to build affordable housing utilizing low income housing tax credits and other funding mechanisms.The City generates funds for affordable housing from in lieu fees and through loan repayments.Additionally,the City of South San Francisco Printed on 2/9/2018Page 2 of 8 powered by Legistar™ File #:18-93 Agenda Date:2/14/2018 Version:1 Item #:1. generates funds for affordable housing from in lieu fees and through loan repayments.Additionally,the City has remaining funds as the Housing Successor to the former South San Francisco Redevelopment Agency. ·The City can impose an affordable housing impact fee on commercial development to use as described above. ·The City can donate or discount property to affordable housing developers to construct tax credit projects.For example,the City donated 316 Miller Avenue for the construction of an 81-unit senior, affordable, housing project on the site. ·The City can waive fees or provide subsidies to developers to incentivize construction of more affordable units,or units at a deeper level of affordability.For example,the City approved a $3.5 million grant to the developer of the Grand &Linden Project,ROEM,to include affordable units in the project. Inclusionary Housing Ordinance:The City currently has an inclusionary housing ordinance,codified at Section 20.380 of the South San Francisco Municipal Code (“SSFMC”).This ordinance was last substantively updated in 2010 (included as Attachment 2).The ordinance currently requires developers to designate 20 percent of the total unit count in for-sale,market rate projects at below market rates.The below market rate units must be deed-restricted for 55 years and designated for households earning 50 percent to 110 percent of the area median income. For new,for-sale,market rate developments with fewer than ten total units,the developer may choose to pay an in lieu fee,rather than build the required inclusionary affordable housing units.This in lieu fee is equal to the cost to develop a unit in the market rate project,multiplied by the proportional affordable housing unit requirement.For example,if the total development cost to construct each unit in an eight-unit project is $550,000 and the affordable housing requirement is 1.6 units (8 units x 20 percent),then the in lieu fee would be $880,000 (1.6 units x $550,000). If a developer proposes to meet the standard requirements of the inclusionary housing ordinance,the City Manager may approve the resultant Affordable Housing Agreement between the City and the developer.Should a developer request incentives,waivers,or some other deviation from the standard inclusionary requirement, the City Council must approve the Affordable Housing Agreement. Although the inclusionary housing ordinance provides for the City Council’s ability to grant fee waivers and grants to developers providing affordable housing in their developments,there are not currently any fee waivers or subsidy programs authorized by Council. Benchmarking Other Cities’ Inclusionary Housing Programs Staff has informally reached out to neighboring cities to learn about potential updates to their inclusionary housing ordinances,funding mechanisms and policies as they relate to the 2017 State Legislative Housing Package.Attachment 3 outlines the current inclusionary housing policies for Daly City,Foster City,Redwood City,San Bruno and the City of San Mateo along with considerations for revisions to their policies.Although none of the above referenced cities has received direction from their City Councils yet,staff are working on City of South San Francisco Printed on 2/9/2018Page 3 of 8 powered by Legistar™ File #:18-93 Agenda Date:2/14/2018 Version:1 Item #:1. none of the above referenced cities has received direction from their City Councils yet,staff are working on options that range from 10 percent to 15 percent inclusionary requirements for new rental developments. DISCUSSION Given the passage of AB 1505,the City Council may consider expanding the City’s inclusionary housing ordinance to residential rental developments.Council might also consider amending the existing ordinance to adjust the requirement on residential for-sale developments.In the following pages,staff will lay out options for Council to consider with regard to updating the City’s inclusionary housing ordinance.The City engaged two consultants -Baird +Driskell Community Planning and Century Urban -to conduct feasibility research on the various inclusionary housing options presented. A.Proportion of Affordable Units and Levels of Affordability The City’s existing inclusionary housing ordinance requires 20 percent of the total units in market rate,for-sale, residential projects be designated as affordable housing.AB 1505 allows cities to extend inclusionary requirements to rental developments,but stipulates that if a city requires more than 15 percent affordable units, the State may review the ordinance and require the city to conduct an economic feasibility analysis.As a result of AB 1505’s specific requirements and preliminary feasibility research conducted by consultants,staff has prepared options requiring up to 10 percent of units in residential rental development project be designated for affordable housing. In addition to introducing an inclusionary requirement for rental development,the approaches described below reduce the requirement for for-sale residential developments to 10 percent affordable units.Although a full analysis of the City’s existing 20 percent requirement has not been completed,very few for-sale developments have been entitled and built in South San Francisco since its implementation.Staff anticipates that reducing the requirement for for-sale developments may catalyze the development of more for-sale product.Reducing the for-sale inclusionary requirement to 10 percent should be coupled with an inclusionary requirement for rental developments to meet the goal of 20 percent of all new development being affordable to moderate and lower income households. In order to ensure a range of incomes are served,staff recommends the for-sale product be targeted to moderate and low income households,while the rental product be targeted to low and very low income households.The income limits and affordable rents for each income level are summarized in Attachment 1. Option A: Effective Immediately This option includes directing staff to bring forward an Inclusionary Housing Ordinance that would become effective July 2018 with the following components. ·Require 10 percent of units in new rental developments be designated for low income household,with half of the units designated for low income households (up to 80%of the area median income)and half for very low income households (up to 50% of the area median income). ·Reduce the requirement for for-sale developments from 20 percent to 10 percent,with half of the units designated for moderate income households (up to 120%of the area median income)and half for low City of South San Francisco Printed on 2/9/2018Page 4 of 8 powered by Legistar™ File #:18-93 Agenda Date:2/14/2018 Version:1 Item #:1. income households (up to 80% of the area median income). Staff anticipates this option would slow down residential development,including projects expected to be brought forward in the near future. Staff does not recommend this approach. Option B: Three-Year Phased In Requirement This option includes directing staff to bring forward an Inclusionary Housing Ordinance that would become effective July 2018, but be phased in over three years, as indicated below. Effective July 2018 ·Require 5 percent of units in new rental developments designated for low income households. ·Reduce the requirement for for-sale developments from 20 percent to 10 percent,with half of the units designated for moderate income households and half for low income households. Effective January 2019 ·Require 10 percent of units in new rental developments designated for low income households. ·Maintain the 10 percent requirement for for-sale developments listed above. Effective January 2020 ·Require 10 percent of units in new rental developments be designated for low income household,with half of the units designated for low income households and half for very low income households. ·Maintain the 10 percent requirement for for-sale developments listed above. The benefits of this approach to phasing in the inclusionary requirement is that it will result in inclusionary affordable housing units in rental projects almost immediately,while having the least sudden impact on land values.This option should ensure that the housing development pipeline does not drop off suddenly.This was determined by conducting feasibility research more thoroughly described in Attachment 4.Staff recommends this approach. Staff Recommendations:For the introduction of an inclusionary requirement for rental developments,and changes to the existing for-sale inclusionary requirement,staff recommends Option B:Three-Year Phased Requirement.For the establishment of a new in lieu fee for rental and for-sale units,staff recommends Option B: Developer’s Substitution Cost to Build a Market Rate Unit. B.By-Right Alternatives As discussed above,AB 1505 requires jurisdictions imposing an inclusionary affordable housing requirement on rental developments to provide an alternative means of compliance with rental inclusionary requirements. Two such alternatives are presented below for City Council consideration.If designated as “by-right”, developers would be able to opt to pursue these options rather than build the required affordable housing units onsite.Council need not approve both or either,but must provide some alternate means of meeting the City of South San Francisco Printed on 2/9/2018Page 5 of 8 powered by Legistar™ File #:18-93 Agenda Date:2/14/2018 Version:1 Item #:1. onsite.Council need not approve both or either,but must provide some alternate means of meeting the inclusionary requirement other than simply requiring the developer to build the affordable units on site. Option One: Off-Site Affordable Units Building affordable units offsite,in a fully-affordable project,for example,may be appealing to developers interested in leveraging resources to reduce the cost of producing the affordable units.There are high barriers to this option,though.It can be difficult to secure land appropriate for multi-family development,to go through an entirely separate and potentially lengthy entitlement process,and to receive tax credit and grant funding to provide gap financing.Alternatively,developers may seek to buy existing multi-family units and deed restrict those as affordable for a period of time determined by the City - typically 55 years. A concern with this option may be that the affordable units are constructed after the market rate units,or in a less desirable location.One way to ensure that building affordable units offsite presents a benefit to the community overall is by requiring a greater number of units if offsite affordable units are pursued by the developer.For example,if the base requirement in a market rate development is 10 percent affordable,and would result in 10 units,the developer would be required to provide 15 percent,or 15 affordable units,offsite. This concept is especially beneficial should the Council consider allowing developers to buy existing market rate units and deed restrict them as affordable.In those cases,existing market units may be older and with less amenities than newly planned housing units.To compensate for the difference in unit conditions,requiring extra affordable units may present an overall benefit to the City. Option Two: In Lieu Fee In lieu fees are often discussed as a straight-forward alternative to requiring developers to build inclusionary affordable housing units.In lieu fees tend to be predictable and,if low enough,easy to internalize as a project cost.However,if they are too low and permitted by-right,meaning opting out of building the units is not granted with a discretional approval,most developers will simply pay the fee and not build the units on site. Staff proposes two ways to mitigate this concern:1)require a discretionary approval to pay the in lieu fee;or 2) set the fee at an amount that will be acceptable for some developers to pay and be too costly for other developers who will opt to build affordable units instead. Several fee calculations are presented below: In Lieu Fee Calculation:The City’s consultant,Century Urban,estimated three in lieu fee options for Council consideration.These options represent a high option -the fee we currently charge today -a midrange option, and finally a low cost option that would still result in the City producing funds sufficient to contribute to constructing affordable housing.The calculations and assumptions used to develop these in lieu fee options are provided in Attachment 5. In Lieu Fee Option A: Currently,the in lieu fee for affordable units required in a for-sale residential development is the total development cost of a unit in that project,including the cost of the land.This is estimated to be approximately $420,000 per unit given the following assumptions.It includes land costs,soft costs (including projected City impact fees)and hard costs,assumes a median quality Type V project without unusual construction or parking requirements,and that the project is built without a prevailing wage requirement.Of course,the per unit total City of South San Francisco Printed on 2/9/2018Page 6 of 8 powered by Legistar™ File #:18-93 Agenda Date:2/14/2018 Version:1 Item #:1. requirements,and that the project is built without a prevailing wage requirement.Of course,the per unit total development cost could be much more than $420,000 depending on how much the developer paid for the land, the level of finish, and the construction type. The fee is calculated on a project by project basis. In Lieu Fee Option B: Developer’s Substitution Cost to Build a Market Rate Unit This midrange options is equal to the price a developer would pay to substitute a market rate unit for an affordable unit -approximately $308,000 per unit.This cost is calculated as the amount a developer would pay the City in order to build a market rate unit in lieu of an affordable housing unit the developer would otherwise be required to build,while maintaining the same percentage of development profit.If the developer is able to receive more rent (by having a market rate instead of an affordable unit),the project is more profitable and hence a cost increase resulting from paying the in lieu fee keeps the profit percentage the same.The amount is driven by the difference in rates between market rate units and below market units,which for this analysis was assumed to be 10 percent of the project at 50 percent of AMI.If paying the in lieu fee is permitted by-right, staff recommends this approach. In Lieu Fee Option C: City’s Gap Payment to Construct an Affordable Unit This is the lowest cost option to developers.It sets the in lieu fee at the local contribution required for a standard,low income housing tax credit (LIHTC)project -approximately $120,000.Specifically,the cost calculates the City’s required contribution to induce the development of a median quality tax credit project with rents at 50 percent of the area median income (serving very low income households).It assumes state and county subsidy contributions,the availability of construction financing,and the continued value of federal LIHTC tax credits.Because the tax credit market can change substantially with changes in federal policy,and because county subsidies are not guaranteed,if Council selects this option,staff recommends that it be granted through a discretionary approval and recalculated on an annual basis. CONCLUSION All of the options presented in this staff report have benefits and drawbacks.Staff is seeking feedback on the overall goals Council would like to see implemented.There are several questions the Council should consider, such as: ·What overall percentage of affordable should be required on rental and/or for sale housing developments, and how quickly should new affordability requirements take effect? ·Are onsite units preferred to offsite units? ·Are in lieu fees acceptable and, if so, at what amount? ·Are affordable units required to serve all income levels from very low to moderate,or is a narrower segment preferred? The options presented provide Council an opportunity to weigh these goals in a concrete way.Following feedback from Council,staff will prepare a draft inclusionary housing ordinance reflecting Council’s direction, and present it to the Joint Housing Subcommittee for initial review and refinement.Following the Joint Housing Subcommittee meeting,staff would revise the ordinance and bring it forward to the Planning Commission for a public hearing and recommendation to the City Council,which would ultimately review andCity of South San Francisco Printed on 2/9/2018Page 7 of 8 powered by Legistar™ File #:18-93 Agenda Date:2/14/2018 Version:1 Item #:1. Commission for a public hearing and recommendation to the City Council,which would ultimately review and consider it for approval. Attachments: 1.San Mateo County Incomes and Affordable Rents 2.City’s Inclusionary Housing Ordinance 3.Benchmarking of Inclusionary Housing Ordinances 4.Feasibility Research of Inclusionary Housing Requirement for Rentals 5.Calculations and Assumptions for In Lieu Fee Options City of South San Francisco Printed on 2/9/2018Page 8 of 8 powered by Legistar™ San Mateo County Income Limits and Affordable Rents, 2017 Income Category 1 2 3 4 5 6 7 8 Extremely Low (30% AMI)27,650 31,600 35,550 39,500 42,700 45,850 49,000 52,150 Very Low (50% AMI)46,100 52,650 59,250 65,800 71,100 76,350 81,600 86,900 Low (80% AMI)73,750 84,300 94,850 105,350 113,800 122,250 130,650 139,100 Median (100% AMI)80,700 92,250 103,750 115,300 124,500 133,750 142,950 152,200 Moderate (120% AMI)96,850 110,700 124,500 138,350 149,400 160,500 171,550 182,600 Income Category 1 2 3 4 5 6 7 8 Extremely Low (30% AMI)691 790 889 988 1,068 1,146 1,225 1,304 Very Low (50% AMI)1,153 1,316 1,481 1,645 1,778 1,909 2,040 2,173 Low (80% AMI)1,844 2,108 2,371 2,634 2,845 3,056 3,266 3,478 Median (100% AMI)2,018 2,306 2,594 2,883 3,113 3,344 3,574 3,805 Moderate (120% AMI)2,421 2,768 3,113 3,459 3,735 4,013 4,289 4,565 * Rent calculations assume all utilities are paid by landlord. A deduction would be made if a landlord passed utilites onto the tenant. Income limits are updated annually and generally published in May or June. Income Limits by Household Size Affordable Rents by Household Size* 1/31/2018 South San Francisco Municipal Code (South San Francisco, California) https://qcode.us/codes/southsanfrancisco/1/9 Chapter 20.380 INCLUSIONARY HOUSING REGULATIONSChapter 20.380 INCLUSIONARY HOUSING REGULATIONS 20.380.001 Purpose and Intent The purpose and intent of this chapter is as follows: A. The City’s objective, as established by the housing element of the General Plan, is to ensure that all residential development, including all master planned and specific planned communities and all residential development provide a range of housing opportunities for all identifiable economic segments of the population, including households of low- and moderate-income. It is the policy of the City to: 1. Require that a minimum of 20 percent of all approved residential development consisting of four or more units be restricted to and affordable to low- and moderate-income households; subject to adjustment based on the granting of certain incentives; and 2. Require that at least 20 percent of all new dwelling units be restricted to and affordable to low- or moderate-income households; and 3. Require that all developments consisting of ten units or more shall provide the affordable units on-site; and 4. Under certain conditions, allow alternatives to constructing new affordable units on-site as a means of providing affordable units in the City; and 5. For housing developments consisting of four to nine units, allow inclusionary requirements to be satisfied through the payment of an in-lieu fee as an alternative to requiring inclusionary units to be constructed. B. It is the purpose of this chapter to implement the City’s objectives and policies as stated in subsection A. C. Nothing in this chapter is intended to create a mandatory duty on the part of the City or its employees under the Government Tort Claims Act and no cause of action against the City or its employees is created by this chapter that would not arise independently of the provisions of this chapter. (Ord. 1432 § 2, 2010) 20.380.002 Definitions Whenever the following terms are used in this chapter, they shall have the meaning established by this section: A. “Affordable housing” means, for the purposes of this chapter, housing that is affordable to families with low, or moderate incomes. B. “Affordable housing agreement” means a legally binding agreement between a developer and the City to ensure that the inclusionary requirements of this chapter are satisfied. The agreement establishes, among other things, the number of required inclusionary units, the unit sizes, location, affordability tenure, terms and conditions of affordability and unit production schedule. C. “Allowable housing expense” means the total monthly or annual recurring expenses required of a household to obtain shelter. 1. For a for-sale unit, allowable housing expenses include loan principal and interest at the time of initial purchase by the homebuyer, allowances for property and mortgage insurance, property taxes, homeowners association dues and a reasonable allowance for utilities as defined by the federal regulations for the tenant- based rental assistance program. 2. For a rental unit, allowable housing expenses include rent and a utility allowance as determined annually by the U.S. Department of Housing and Urban Development, as well as all monthly payments made by the tenant to the lessor in connection with use and occupancy of a housing unit and land and facilities associated therewith, including any separately charged fees, utility charges, or service charges assessed by the lessor and payable by the tenant. D. “Combined inclusionary housing project” means separate residential development sites which are linked by a contractual relationship such that some or all of the inclusionary units which are associated with one development site are produced and operated at a separate development site or sites. E. “Conversion” means the change of status of a dwelling unit from a purchased unit to a rental unit or vice versa. F. “Density bonus (new residential construction)” means a density increase of at least 20 percent for low- income projects and at least 15 percent for moderate-income projects, unless a lesser percentage is elected by 1/31/2018 South San Francisco Municipal Code (South San Francisco, California) https://qcode.us/codes/southsanfrancisco/2/9 the developer, over the otherwise maximum allowable residential density under the applicable zoning ordinance and land use element of the General Plan as of the date of application by the developer to the City. G. “Financial assistance” means assistance to include, but not be limited to, the subsidization of fees, infrastructure, land costs, or construction costs, the use of redevelopment set-aside funds, community development block grant (CDBG) funds, or the provision of other direct financial aid in the form of cash transfer payments or other monetary compensation, by the City of South San Francisco. H. “Incentives” means the reductions and approvals described in Government Code, Section 65915(k), granted in return for the provision of certain desired types of affordable housing or related amenities as determined by the City Council. I. “Inclusionary housing project” means a new residential development or conversion of existing residential buildings which has at least 20 percent of the total units reserved and made affordable to low- or moderate- income households as required by this chapter. Of the 20 percent, at least eight shall be affordable to persons of low-income and no more than 12 percent affordable to persons of low-to-moderate income as those terms are defined in this chapter. J. “Inclusionary unit” means a dwelling unit that will be offered for rent or sale exclusively to and which shall be affordable to low- or moderate-income households, as required by this chapter. K. “Income” means any monetary benefits that qualify as income in accordance with the criteria and procedures used by the City of South San Francisco Economic and Community Development Department. In addition to the income of a targeted group, limitations on assets may also be used as a factor in determining eligibility for rental or for-sale units. L. “Low-income household” means those households whose gross income is more than 50 percent but does not exceed 80 percent of the lesser of: (i) the unadjusted area median income for San Mateo County, as determined annually by the U.S. Department of Housing and Urban Development; or (ii) the adjusted area median income for San Mateo County, as determined annually by the U.S. Department of Housing and Urban Development. M. “Market-rate unit” means a dwelling unit where the rental rate or sales price is not restricted either by this chapter or by requirements imposed through other local, state, or federal affordable housing programs. N. “Moderate-income household” means households whose gross income is greater than 80 percent but does not exceed 120 percent of the unadjusted area median income for San Mateo County, as determined annually by the U.S. Department of Housing and Urban Development. O. “Median income” means the median income earned by a household or family, adjusted by size, as published by U.S. Department of Housing and Urban Development. P. “Offsets” means concessions or assistance to include, but not be limited to, direct financial assistance, density increases, standards modifications or any other financial, land use, or regulatory concession which would result in an identifiable cost reduction enabling the provision of affordable housing. Q. “Residential development” means any new residential construction of rental or for-sale units; or development revisions, including those with and without a master plan or specific plan, planned unit developments, site development plans, mobilehome developments and conversions of apartments to condominiums, as well as dwelling units for which the cost of shelter is included in a recurring payment for expenses, whether or not an initial lump sum fee is also required. R. “Target income level” means the unadjusted income standards for low- and moderate-income levels within San Mateo County, as determined annually by the U.S. Department of Housing and Urban Development, and adjusted for family size. S. “Total residential units” means the total units approved by the final decision making authority. Total residential units are composed of both market rate units and inclusionary units. (Ord. 1432 § 2, 2010) 20.380.003 Inclusionary Housing Requirement A. The inclusionary housing requirements of this chapter shall apply as follows: 1. This chapter shall apply to all residential market-rate dwelling units resulting from new construction of “for-sale” projects consisting of four or more residential units, as well as the conversion of apartments to condominiums. 2. This chapter shall apply to all residential market-rate dwelling units resulting from new construction of rental projects consisting of four or more residential units, as well as the conversion of condominiums to 1/31/2018 South San Francisco Municipal Code (South San Francisco, California) https://qcode.us/codes/southsanfrancisco/3/9 apartments, if the owner of the rental project or converted project receives any direct financial assistance or contribution from the City, including density bonuses, as specified in Government Code Section 65915, et seq. 3. For any residential development or development revision of four or more units, not less than 20 percent of the total units approved shall be constructed and restricted both as to occupancy and affordability to low- and moderate-income households. B. This chapter shall not apply to the following: 1. Existing residences which are altered, improved, restored, repaired, expanded or extended, provided that the number of units is not increased, except that this chapter shall pertain to the subdivision of land for the conversion of apartments to condominiums; 2. Conversion of a mobilehome park pursuant to Section 21.37.120; 3. The construction of a new residential structure which replaces a residential structure that was destroyed or demolished within two years prior to the approval of a building permit for the new residential structure, provided that the number of residential units is not increased from the number of residential units of the previously destroyed or demolished residential structure; 4. Second dwelling units not constructed to fulfill inclusionary housing requirements and developed in accordance with Section 20.350.033 (“Second Dwelling Units”); 5. Those residential units which have obtained approval of a vesting tentative map or a development agreement prior to the effective date of the ordinance codified in this chapter, as set forth in Section 20.380.017 (“Pre-Existing Approvals”). 6. New construction of rental projects consisting of four or more residential units, as well as the conversion of condominiums to apartments, when the only financial assistance that the rental project or converted project receives from the City is for the sole purpose of providing on-site affordable housing units as part of the project and the City determines that the financial assistance provided by the City does not exceed the actual cost of providing the specific on-site affordable units. (Ord. 1517 § 2, 2016; Ord. 1432 § 2, 2010) 20.380.004 New Residential Projects Applications for planned unit development permits, tentative maps, vesting tentative maps, and other land use entitlements that seek approval of a residential development project of four or more residential units shall submit an inclusionary housing plan as follows: A. All applications approved on or after the effective date, or deemed complete on or after the effective date, of the ordinance codified in this chapter are required by this chapter to provide an affordable housing agreement with the application for development. This affordable housing agreement will include appropriate text, maps, tables, or figures to establish the basic framework for implementing the requirements of this chapter. It shall establish, at a minimum, but shall not be limited to, the following: 1. The number of market rate units in the master plan or specific plan; 2. The number of required inclusionary units for low- and moderate-income households in the project including the specific levels of affordability; 3. The designated sites for the location of the inclusionary units, including, but not limited to, any sites for locating off-site inclusionary housing projects or combined inclusionary housing projects; 4. An affordable housing agreement shall be a condition of all future discretionary permits for the development area such as tentative maps, parcel maps, planned unit developments and site development plans. All relevant terms and conditions of the affordable housing agreement shall be filed and recorded as a restriction on the project as a whole and those individual lots, units or projects which are designated as inclusionary units. The affordable housing agreement shall be consistent with Section 20.380.014 (“Affordable Housing Agreement as a Condition of Development”). B. The location and phasing of inclusionary dwelling units may be modified by the body granting final approval of the project as a condition of approval for the project. C. All existing planned unit development permits, Conditional Use Permits, master plans or specific plans proposed for major amendment, pursuant to Chapter 20.530 (“Specific Plans and Plan Amendments”), shall incorporate into the amended master plan or specific plan document an inclusionary housing plan, consistent with this section. (Ord. 1432 § 2, 2010) 20.380.005 Affordable Housing Standards 1/31/2018 South San Francisco Municipal Code (South San Francisco, California) https://qcode.us/codes/southsanfrancisco/4/9 The affordable housing standards are as follows: A. All residential developments subject to this chapter, must satisfy the inclusionary housing requirements of this chapter, notwithstanding a developer ’s request to process a residential development under other program requirements, laws or regulations, including, but not limited to, Chapter 20.390 (“Bonus Residential Density”). B. Unless otherwise provided in this chapter, inclusionary units shall be built on the residential development project site. C. The required inclusionary units shall be constructed concurrently with market-rate units unless both the final decision-making authority of the City and developer agree within the affordable housing agreement to an alternative schedule for development. D. Inclusionary rental units subject to this chapter, shall remain restricted and affordable to the designated income group for 55 years. Notwithstanding anything to the contrary in this chapter, no inclusionary unit shall be rented for an amount which exceeds 90 percent of the actual rent charged for a comparable market unit in the same development, if any. E. The inclusionary for-sale units shall remain affordable for a term of 55 years and such affordability term shall be filed and recorded as a restriction on those individual lots, units or projects which are designated as inclusionary units. After the initial sale of the inclusionary for-sale units at a price affordable to the target income level group, inclusionary for-sale units shall remain affordable to subsequent income eligible buyers pursuant to a resale restriction with a term of 55 years. For-sale units may be sold at market price under the conditions in subsections F through H. F. Base Resale Price. The price at which the owner purchased the affordable unit shall be adjusted by the percentage increase or decrease in the median annual income at 100 percent of median of a family of four in San Mateo County. The percentage increase or decrease shall be computed for the period that the affordable unit is held by owner. This adjusted price shall be increased by the market value, if any, of any documented, permanent capital real estate or fixed improvements approved by City. No price adjustment will be made except upon presentation to the City of written documentation of all expenditures made by owner for which an adjustment is requested. The adjusted price shall be decreased by the amount necessary to repair any damages and to put the unit into a sellable condition, including items such as paint, cleaning, construction repairs, and to bring said unit into conformity with all applicable provisions of the South San Francisco Municipal Code and the affordable housing guidelines established by the City. The value of price adjustments shall be reasonably determined by the City. The resulting price shall be the base resale price of the unit. G. Upon resale of the unit, if the affordable unit is sold above the restricted affordable price during the 55 year affordability term, the City will receive the difference between the base resale price and the actual market sales price of the unit. H. Funds recaptured by the City shall be used in assisting other eligible households with home purchases at affordable prices. To the extent possible, projects using for-sale units to satisfy inclusionary requirements shall be designed to be compatible with conventional mortgage financing programs including secondary market requirements. I. Ideally, off-site inclusionary units should be located on sites that are in proximity to or will provide access to employment opportunities, urban services, or major roads or other transportation and commuter rail facilities and that are compatible with adjacent land uses. J. The design of the inclusionary units shall be consistent with General Plan standards; compatible with the design of the total project development in terms of appearance, materials and finished quality and conform to General Plan standards; and, consistent with affordable housing development standards prepared by the Department of Economic and Community Development as adopted by the City Council. K. Inclusionary projects shall provide a mix of number of bedrooms in the affordable dwelling units in response to affordable housing demand priorities of the City. Inclusionary projects shall provide a distribution of affordable units within the designated affordability range as follows: 1. One-third of low-income units shall be affordable to households between 50 and 60 percent of median income; 2. One-third of low-income units shall be affordable to households between 60 and 70 percent of median income; 3. One-third of low-income units shall be affordable to households between 70 and 80 percent of median income; 4. One-third of moderate-income units shall be affordable to households between 80 and 90 percent of median income; 1/31/2018 South San Francisco Municipal Code (South San Francisco, California) https://qcode.us/codes/southsanfrancisco/5/9 5. One-third of moderate-income units shall be affordable to households between 90 and 100 percent of median income; 6. One-third of moderate-income units shall be affordable to households between 100 and 110 percent of median income. L. No building permit shall be issued, nor any development approval granted for a development which does not meet the requirements of this chapter. No inclusionary unit shall be rented or sold except in accordance with this chapter. (Ord. 1432 § 2, 2010) 20.380.006 Calculating the Required Number of Inclusionary Units A. Subject to adjustments for incentives, the required number of low- and moderate-income inclusionary units shall be 20 percent of the total residential units, approved by the final decision-making authority. B. If the inclusionary units are to be provided within an off-site combined or other project, the required number of affordable inclusionary units shall be 20 percent of the total residential units to be provided both on- site and/or off-site. Subject to the maximum density permitted in the General Plan or granted by specific authorization of the Planning Commission or City Council. Fractional inclusionary units of at least one-half (0.5) will be subject to payment of the in-lieu fee for the proportionate amount of the fractional unit. C. The in-lieu fee to be paid for each fractional inclusionary dwelling unit shall be proportionate to the per- unit in-lieu fee described in Section 20.380.011 (“In-lieu Fees”). (Ord. 1432 § 2, 2010) 20.380.007 Alternatives to Constructing New Inclusionary Units Notwithstanding any contrary provisions of this chapter, at the sole discretion of the City Council, the City may determine that an alternative to the construction of new inclusionary units is acceptable. A. The City Council may approve alternatives to the construction of new inclusionary units where the proposed alternative supports specific housing element policies and goals and assists the City in meeting its state housing requirements. 1. Such determination shall be based on findings that new construction would be infeasible or present unreasonable hardship in light of such factors as project size, site constraints, market competition, price and product type disparity, developer capability, and financial subsidies available. Evidence must be submitted to the City Manager or his or her designee and included in the request for any waiver of the construction of new inclusionary units. 2. Alternatives may include, but are not limited to, acquisition and rehabilitation of affordable units, conversion of existing market units to affordable units, construction of special needs housing projects or programs (shelters, transitional housing, etc.), and the construction of second dwelling units. B. Second dwelling units constructed to satisfy an inclusionary housing requirement shall be rent restricted to affordable rental rates, and renters shall be income-qualified, as specified in the applicable affordable housing agreement. In no event shall a developer be allowed to construct more than a total of 15 second dwelling units in any given development to satisfy an inclusionary requirement. C. Contribution to a special needs housing project or program may also be an acceptable alternative based upon such findings. The requisite contribution shall be calculated in the same manner as an in-lieu fee per Section 20.380.011 (“In-lieu Fees”). (Ord. 1432 § 2, 2010) 20.380.008 Combined Inclusionary Housing Projects An affordable housing requirement may be satisfied with off-site construction as follows: A. When it can be demonstrated by a developer that the goals of this chapter and the City’s housing element would be better served by allowing some or all of the inclusionary units associated with one residential project site to be produced and operated at an alternative site or sites, the resulting linked inclusionary project site(s) is a combined inclusionary housing project. B. It is at the sole discretion of the City Council to authorize the residential site(s) which form a combined inclusionary housing project. 1. Such decision shall be based on findings that the combined project represents a more effective and feasible means of implementing this chapter and the goals of the City’s housing element. 1/31/2018 South San Francisco Municipal Code (South San Francisco, California) https://qcode.us/codes/southsanfrancisco/6/9 2. Factors to be weighed in this determination include: a. The feasibility of the on-site option considering project size, site constraints; b. Competition from other projects; c. Difficulty in integrating due to significant price and product type disparity; and d. Lack of capacity of the on-site development entity to deliver affordable housing. Also to be considered are whether the off-site option offers greater feasibility and cost effectiveness, location advantages such as proximity to jobs, schools, transportation, and services, diminished impact on other existing developments, capacity of the development entity to deliver the project, and satisfaction of multiple developer obligations that would be difficult to satisfy with multiple projects. C. All agreements between parties to form a combined inclusionary housing project shall be made a part of the affordable housing agreement required for the site(s), which affordable housing agreement(s) shall be approved by the City Council. (Ord. 1432 § 2, 2010) 20.380.009 Disposition of Excess Inclusionary Units Inclusionary units created which exceed the final requirement for a project may, subject to City Council approval in the affordable housing agreement, be utilized by the developer to satisfy other inclusionary requirements for which it is obligated or market the units to other developers as a combined project subject to the requirements of Section 20.380.008 (“Combined Inclusionary Housing Projects”). (Ord. 1432 § 2, 2010) 20.380.010 Offsets to the Cost of Affordable Housing Development The City shall consider making offsets available to developers when necessary to enable residential projects to provide a preferable product type or affordability in excess of the requirements of this chapter. A. Offsets will be offered by the City to the extent that resources and programs for this purpose are available to the City and approved for such use by the City Council, and to the extent that the residential development, with the use of offsets, assists in achieving the City’s housing goals. To the degree that the City makes available programs to provide offsets, developers may make application for such programs. B. Evaluation of requests for offsets shall be based on the effectiveness of the offsets in achieving a preferable product type and/or affordability objectives as set forth within the housing element; the capability of the development team; the reasonableness of development costs and justification of subsidy needs; and the extent to which other resources are used to leverage the requested offsets. C. Nothing in this chapter establishes, directly or through implication, a right to receive any offsets from the City or any other party or agency to enable the developer to meet the obligations established by this chapter. D. Projects are entitled to density bonuses and/or other incentives in accordance with provisions of State law, pursuant to the provisions of Chapter 20.390 (“Bonus Residential Density”). E. Any offsets approved by the City Council and the housing affordability to be achieved by use of those offsets shall be set out within the affordable housing agreement pursuant to Section 20.390.010 (“Inclusion of Density Bonus Housing Agreement as a Condition of Development”) or, at the City’s discretion in a subsequent document. F. Developers are encouraged to utilize local, state or federal assistance, when available, to meet the affordability standards set forth in Sections 20.380.003 (“Inclusionary Housing Requirements”) and 20.380.005 (“Affordable Housing Standards”). (Ord. 1432 § 2, 2010) 20.380.011 In-Lieu Fees Payment of a fee in-lieu of construction of affordable units may be appropriate in the following circumstances: A. For any residential development or development revision consisting of four to nine units, the inclusionary requirements may be satisfied through the payment to the City of an in-lieu fee. B. The in-lieu fee to be paid for each inclusionary dwelling unit shall be equal to the developers costs of constructing a market rate unit in the proposed project, including land and improvements. C. In lieu-fees shall be paid at the time a building permit is issued for the development. D. At the discretion of the City Council, where a developer is authorized to pay a fee in-lieu of development, an irrevocable dedication of land or other non-monetary contribution of a value not less than the sum of the 1/31/2018 South San Francisco Municipal Code (South San Francisco, California) https://qcode.us/codes/southsanfrancisco/7/9 otherwise required in-lieu fee may be accepted as an alternative to paying the in-lieu fee if it is determined that the non-monetary contribution will be effectual in furthering the goals and policies of the housing element and this chapter. The valuation of any land offered in-lieu shall be determined by an appraisal made by an agent mutually agreed upon by the City and the developer. Costs associated with the appraisal shall be borne by the developer. E. Where a developer is authorized to pay a fee in-lieu of development of affordable housing units, any approvals shall be conditioned upon a requirement to pay the in-lieu fee in an amount established by the chapter in effect at the time of payment. F. An alternative to paying an in-lieu fee(s), inclusionary housing requirements may be satisfied either through a combined inclusionary housing project, pursuant to Section 20.380.008 (“Combined Inclusionary Housing Projects”) or new construction of inclusionary units subject to approval of the final decision-making authority. (Ord. 1432 § 2, 2010) 20.380.012 Collection of Fees All in-lieu fees collected hereunder shall be deposited in a housing trust fund. The fund shall be administered by the City and shall be used only for the purpose of providing funding assistance for the provision of affordable housing and reasonable costs of administration consistent with the policies and programs contained in the housing element of the General Plan. (Ord. 1432 § 2, 2010) 20.380.013 Preliminary Project Application and Review Process The preliminary project application/review process shall be as follows: A. A developer of a residential development, proposing an inclusionary housing project shall have an approved site development plan prior to execution of an affordable housing agreement for the project. The developer may submit a preliminary application to the housing and redevelopment director prior to the submittal of any formal applications for such housing development. The preliminary application shall include the following information if applicable: 1. A brief description of the proposal including the number of inclusionary units proposed; 2. The zoning, General Plan designations and assessors parcel number(s) of the project site; 3. A site plan, drawn to scale, which includes: building footprints, driveway and parking layout, building elevations, existing contours and proposed grading; and 4. A letter identifying what specific offsets and/or adjustments are being requested of the City. Justification for each request should also be included. B. Within 30 days of receipt of the preliminary application by the planning director for projects not requesting offsets or incentive adjustments, or ninety days for projects requesting offsets or incentive adjustments the Department shall provide to an applicant, a letter which identifies project issues of concern, the offsets and incentive adjustments that the City Manager or his or her designee can support when making a recommendation to the final decision-making authority, and the procedures for compliance with this chapter. The applicant shall also be provided with a copy of this chapter and related policies, the pertinent sections of the California codes to which reference is made in this chapter and all required application forms. (Ord. 1432 § 2, 2010) 20.380.014 Affordable Housing Agreement as a Condition of Development This chapter requires the following: A. Developers subject to this chapter shall demonstrate compliance with this chapter by executing an affordable housing agreement prepared by the Department of Economic and Community Development department and submitted to the developer for execution. Agreements which conform to the requirements of this section and which do not involve requests for offsets and/or incentives, other than those permitted by right, if any, shall be reviewed by the City Manager or his or her designee and approved by the City Manager or his or her designee. B. Agreements which involve requests for offsets and/or incentives, other than those permitted by right, shall require the recommendation of the Department of Economic and Community Development and action by the City Council as the final decision-maker. C. Following the approval and execution by all parties, the affordable housing agreement with approved site development plan shall be recorded against the entire development, including market-rate lots/units and the 1/31/2018 South San Francisco Municipal Code (South San Francisco, California) https://qcode.us/codes/southsanfrancisco/8/9 relevant terms and conditions therefrom filed and subsequently recorded as a separate deed restriction or regulatory agreement on the affordable project individual lots or units of property which are designated for the location of affordable units. D. The approval and execution of the affordable housing agreement shall take place prior to final map approval and shall be recorded upon final map recordation or, where a map is not being processed, prior to the issuance of building permits for such lots/units. E. The affordable housing agreement may require that more specific project and/or unit restrictions be recorded at a future time. F. The affordable housing agreement shall provide that the project applicant pay an administrative fee to reimburse the City for all administrative/processing costs and fees incurred in processing the affordable housing plan and implementing the requirements of this chapter on a project specific basis. The City may waive the administrative fee as an incentive or off-set for the provision of affordable units. G. The affordable housing agreement shall bind all future owners and successors in interest for the term of years specified therein. H. An affordable housing agreement, for which the inclusionary housing requirement will be satisfied through new construction of inclusionary units, either on-site or off-site, shall establish, but not be limited to, the following: 1. The number of inclusionary dwelling units proposed, with specific calculations detailing the application of any incentive adjustment credit; 2. The unit square footage, and number of bedrooms; 3. The proposed location of the inclusionary units; 4. Amenities and services provided, such as daycare, after school programs, transportation, job training/employment services and recreation; 5. Level and tenure of affordability for inclusionary units; 6. Schedule for production of dwelling units; 7. Approved offsets provided by the City; 8. Where applicable, requirements for other documents to be approved by the City, such as marketing, leasing and management plans; financial assistance/loan documents; resale agreements; and monitoring and compliance plans; 9. Where applicable, identification of the affordable housing developer and agreements specifying their role and relationship to the project. 10. An affordable housing agreement, for which the inclusionary housing requirement will be satisfied through payment to the City of any in-lieu contributions other than fee monies, such as land dedication, shall include the method of determination, schedule and value of total in-lieu contributions. 11. An affordable housing agreement will not be required for projects which will be satisfying their inclusionary housing requirement through payment to the City of an in-lieu fee unless the applicant requests payment options not provided by this chapter. (Ord. 1432 § 2, 2010) 20.380.015 Agreement Amendments Any amendment to an affordable housing agreement shall be processed in the same manner as an original application for approval, except as authorized in Section 20.380.004(C). (Ord. 1432 § 2, 2010) 20.380.016 Period of Affordability The City or its designee shall have a first right of refusal to purchase affordable units offered for sale during the tenure of affordability. The first right of refusal to purchase the affordable unit shall be submitted in writing to the director of the Department of Economic and Community Development. Within 90 days of its receipt, the City shall indicate its intent to exercise the first right of refusal for the purpose of providing affordable housing. (Ord. 1432 § 2, 2010) 20.380.017 Pre-Existing Approvals Any project for which an executed development agreement has become effective prior to August 28, 2010, or for which a complete application for a vesting tentative map has been filed by August 28, 2010, shall not be 1/31/2018 South San Francisco Municipal Code (South San Francisco, California) https://qcode.us/codes/southsanfrancisco/9/9 subject to the requirements of this ordinance, but shall be subject to the requirements of the City’s inclusionary housing ordinance, if any, in effect at the time the development agreement became effective or the complete vesting tentative map application was filed. (Ord. 1432 § 2, 2010) 20.380.018 Enforcement Enforcement provisions are as follows: A. The provisions of this chapter shall apply to all developers and their agents, successors and assigns proposing a residential development governed by this chapter. No building permit or occupancy permit shall be issued, nor any entitlement granted, for a project which is not exempt and does not meet the requirements of this chapter. All inclusionary units shall be rented or owned in accordance with this chapter. B. The developer and its agents, successors and assigns shall annually certify tenants as to the income eligibility for occupancy of below market rate rental units and the annual certification shall be submitted to the Department of Economic and Community Development. If developer and its agents, successors and assigns fail to perform an annual certification, developer shall be fined $1,000 for each below market unit whose tenants were not subject to an annual certification. The City shall continue to fine developer an additional $1,000 for every 30-day period for each below market unit whose tenants have not been subject to an annual certification. City shall take steps to assess these fines as a lien against either the property where the below market units are located or against the project property. C. If developer at any time fails to make available or to provide below market rate rental unit at the required affordable rent levels, developer is subject to a fine of $2,500 for each below market unit not provided pursuant to the affordable housing agreement. The City shall continue to fine developer an additional $2,500 for every 30- day period after the initial fine for each below market unit not provided pursuant to the affordable housing agreement. City shall take steps to assess these fines as a lien against either the property where the below market units are located or against the project property. D. The City may institute any appropriate legal actions or proceedings necessary to ensure compliance with this chapter, including but not limited to actions to revoke, deny or suspend any permit or development approval. In the event the City must institute legal action to enforce the provisions of this ordinance, the City shall be entitled to recover its administrative costs, including reasonable attorneys’ fees, in addition to any other remedy provided by the court. E. Any individual who sells or rents a restricted unit in violation of the provisions of this chapter shall be required to forfeit all monetary amounts so obtained. Such amounts shall be added to the City’s housing trust fund. (Ord. 1432 § 2, 2010) 20.380.019 Savings clause All code provisions, ordinances, and parts of ordinances in conflict with the provisions of this chapter are repealed. The provisions of this chapter, insofar as they are substantially the same as existing code provisions relating to the same subject matter shall be construed as restatements and continuations thereof and not as new enactments. With respect, however, to violations, rights accrued, liabilities accrued, or appeals taken, prior to the effective date of this ordinance, under any chapter, ordinance, or part of an ordinance shall be deemed to remain in full force for the purpose of sustaining any proper suit, action, or other proceedings, with respect to any such violation, right, liability or appeal. (Ord. 1432 § 2, 2010) ATTACHMENT 3: BENCHMARKING OF INCLUSIONARY HOUSING ORDINANCES CITY CURRENT INCLUSIONARY HOUSING ORDINANCE CONSIDERATIONS Daly City Rental Projects All rental projects shall pay an affordable housing impact fee Ownership Projects Five or more units shall either include 20 percent of the units to be affordable to Moderate Income Households or, if approved by the City Manager pay the impact fee required The City is working with a consultant to determine updates to their impact fees. Staff is considering up to 15% inclusionary requirement for new rental developments. Foster City General Development Plans 20% inclusionary policy in the Housing Element of the General Plan that applies to all new housing developments, not just those in redevelopment project areas. As a result, the Pilgrim Triton Master Development Agreement and Foster Square Development Agreement include provisions requiring affordable housing. Affordable Housing Commercial Linkage Fee An affordable housing commercial linkage fee is imposed on all new construction of commercial development projects, including mixed-use projects, regardless of zoning designation of the project site. City staff has no current plans to make changes to their ordinance or policies. Redwood City Affordable Housing Impact Fee Ordinance For projects with 5 or more new units the ordinance requires the following fees: $20 Fee for condos/apartments per Sq. Ft. $25 Single Family/Duplex/Triplex/Townhomes For new commercial and retail developments over 5,000 sq/ft $20 Offices per Sq. Ft. $5 per Sq. Ft. Retail/Hotels Downtown Precise Plan Reserves 15 percent (375 units) of the maximum allowable residential development for affordable housing. City staff may revisit their impact fees. Staff is considering up to 15% inclusionary requirement for new rental developments. San Bruno Residential Ownership Projects New residential ownership projects are required to provide at least 15 percent of the units within the project as affordable to low and moderate-income households, with the possibility of an alternative compliance method, such as the payment of residential impact fees, with the approval of the City Council. Affordable Housing Impact Fee The ordinance applies to new residential ownership or rental developments of five (5) units or more, and all new nonresidential developments throughout the City, except public uses City staff is considering applying an inclusionary requirement of 15% for new rental and ownership developments of five or more units. ATTACHMENT 3: BENCHMARKING OF INCLUSIONARY HOUSING ORDINANCES City of San Mateo For developments consisting of 11 or more units 15% of ownership units will be affordable to moderate income families, or 10% of ownership units will be affordable to low income families. 15% of rental units will be affordable to low income families, or 10% of rental units will be affordable to very low income families TBD Memorandum To: Nell Selander, Deputy Director Economic & Community Development Department City of South San Francisco PO Box 711 |South San Francisco, CA 94083-0711 From: Joshua Abrams Baird + Driskell Community Planning 2635 Benvenue Ave Berkeley, CA 94704 Date: February 1, 2018 Subject: Inclusionary Housing Analysis Executive Summary: In January 2018, Baird + Driskell Community Planning, in partnership with Century Urban, reviewed construction data for South San Francisco to make recommendations for changes to the city’s Inclusionary Housing Ordinance. We also reviewed policies in neighboring cities to ensure that our recommendations are in line with South San Francisco neighbors. Our analysis indicates that the rental market in South San Francisco is healthy and can adjust to new requirements. Specifically, we make the following recommendations: Rental • Five percent of units be set aside for low income households (making 80% of Area Median Income); • In the one to two year timeframe, increase the requirements to ten percent of units set aside to lower income households, 5% for households making 80% of Area Median Income and 5% for households making 60% of Area Median Income; • If the City is interested, it would be possible to add an intermediate step of 10% of units affordable to low income households. Today’s Conditions The consultant team modeled a 150 unit rental development typical of what might be built in South San Francisco. It included a mix of unit sizes from studios to three bedrooms, with most of the units being one bedroom or two bedroom. The density was assumed at 120 units per acre. The total development cost was approximately $62.7 million. We assumed the following unit sizes and rents Unit Type Number in development Square Footage Rents Studio 15 400 $1,810 1 Bedroom 75 650 $2,600 2 Bedroom 53 900 $3,400 3 Bedroom 7 1,200 $3,980 Note: Rents include ancillary profit for developer, e.g. laundry, parking, etc. In today’s market, a developer in South San Francisco would likely seek a profit of 18-20% and a yield on cost (another measure of feasibility) of 5% - 5.25%. The modeled development would meet those returns, but with additional affordable housing requirements, it would be at the lower end of the desired range for developers. Holding all other factors constant, prices for developable land are expected to decrease based on new government requirements, which will help restore the modeled developments to the middle of the desired profit range. Assumptions Profit (as a profit as a percent of development cost) Yield on cost Today’s conditions $12,251,000 (20%) 5.08% With 5% of units affordable to Low Income households $10,999,000 (18%) 5.00% One other way to evaluate the impact on the development is to look at the cost of the requirement compared to the overall cost to build the project. (Cost of the requirement means the capitalized value of the lost rent.) The affordable housing requirement is expected to decrease the overall project value by $1,252,300, which is equivalent to 1.7% of the total value. Development details are summarized below: Units 150 Average unit size 739 sf Average rent $2,867 ($3.88 per sf) Parking ratio 1.25 Total construction cost Hard costs $40,183,125 Soft costs $12,054,938 Fees $30,000 per unit Land $6,000,000 Profit $10,998,750 Project value $73,736,819 Cap rate 4.25 Vacancy 5% Operating costs 35% Future Conditions The consultant team then evaluated a hypothetical project based on potential change in rent and construction cost. We did not adjust land costs because we assumed any increase in land prices would be checked by the deflationary pressure associated with increased affordable housing requirements. Specifically, we • Increased rent by just under 8% and construction costs by just over 5% • Changed affordability assumptions to 10% of units, half at 80% of AMI and half at 60% of AMI • Assumed the developer would use the State Density bonus law (20%) Under these assumptions, development becomes more profitable, with a 21% profit margin and 5.15% yield on cost. In the modeled development, the value associated with the State Density Bonus Law ($4.3 million) is actually greater than the cost of the requirements ($3.8 million). This means the city could expect some developers to voluntarily provide the units even without a requirement. Development details are summarized below: Units 180 Average unit size 739 sf Average rent $3,100 ($4.19 per sf) Parking ratio 1.25 Total construction cost Hard costs $50,706,250 Soft costs $15,211,875 Fees $30,000 per unit Land $6,000,000 Profit $16,355,071 Project value $93,673,196 Cap rate 4.25 Vacancy 5% Operating costs 35% Methodology Our assumptions are based on a median quality Type V construction project without unusual site work, construction or parking requirements, and that the project is built without a prevailing wage requirement. Affordable rental rates are priced ten percentage points below the maximum permitted rents to ensure an adequate pool of potential renters. In some cases, like parking requirements, we based our assumptions on the actual experience of developers, even if the zoning code is different. For example, while the code might list a parking ratio of greater than 1.25, most developers receive waivers to lower the number of required parking spots. Sources: Rents, unit size, amenities and operating assumptions: Databases (CoStar and Axiom Metrics). Interviews with sales brokers, managers of completed projects and developers. Review of city records on projects in various stages of development in South San Francisco. General internet research. Interest rates and terms: Interviews with mortgage brokers and developers. Sales prices of completed rental developments, land price and capitalization rate: Databases (CoStar, Chicago Title, Old Republic Title), Mortgage firm reports. Interviews with land brokers, developers. Profit thresholds: Interviews with developers, sales brokers and mortgage brokers. Construction costs: Interviews with active developers in South San Francisco and general contractors. Visual Summary of Current Assumptions Visual Summary of Future Assumptions South San Francisco - In Lieu Fees I Option A - Unit Development Cost Apartment Development Cost Per Unit Row Calculation/Comment Land Cost $40,000 1 Research Assumption Impact Fees $30,000 2 Research Assumption Soft Costs $80,000 3 Research Assumption Hard Costs $270,000 4 Research Assumption Total Cost $420,000 5 Sum Rows 1,2,3,4 II Option B - Price Developer Would Pay to Substitue One Market Rate Unit for a BMR Unit 1 Per Unit / Month Row Calculation/Comment Revenue *$2,570 6 Research Assumption Other Income $250 7 Research Assumption Vacancy ($140)8 Sum Rows 6&7 Multiplied by 5% Operating Expenses ($930)9 Research Assumption Net Operating Income $1,750 10 Sum Rows 6,7,8&9 Return on Cost 5.0%11 Row 10 Annualized and Divided by Row 5 Additional Revenue from Converting 1 Unit $1,350 12 Additional Revenue from Converting BMR Unit to Market In Lieu Fee:$308,000 13 Row 12 Less Vacancy, Annualized, and Divided by Row 11 * Includes 10% of total units at 50% AMI III Option C - Calculation of City Subsidy for 100% affordable project Uses Per Unit Row Calculation/Comment Land $40,000 14 Research Assumption Total Hard Cost $268,000 15 Research Assumption Soft Costs $94,000 16 Research Assumption Total Development Cost $402,000 17 Sum Rows 14,15&16 Sources Debt $109,000 18 Research Assumption LIHTC Investor Equity **$107,000 19 Research Assumption State Subsidy $16,000 20 Research Assumption County Subsidy $50,000 21 Research Assumption Subtotal Sources $282,000 22 Sum Rows 18,19,20&21 Required City Subsidy $120,000 23 Row 17 minus Row 22 Total Sources $402,000 24 Sum rows 22&23 ** Based on 60% of total units at 50% AMI submit applications prior to July 1, 2018 to complete their entitlement permitting at current fee levels. Silicon Valley’s substantial lack of an adequate housing supply, both market rate and affordable, is a region wide as well as state wide problem and is the most significant factor contributing to the escalating cost of housing. If the affordable percentage and in-lieu fees are pushed higher than those recommended, it is likely to have the unintended consequence of actually worsening the City’s (and the region’s) housing outlook by eliminating market-rate projects in the pipeline. Since 2011, local governments have permitted 135,107 new housing units while the San Francisco Bay Area region has created 633,100 new jobs. That adds up to 4.7 jobs per housing unit, a ration far in excess of the 1.5 jobs per housing unit that experts consider a healthy balance. And, while other Peninsula communities such as Menlo Park, Redwood City or Foster City may be considering higher overall percentages (15%), these communities have already seen a great deal of residential development in the past 5 years and can better afford the “AB 1505 slowdown effect”. In contrast, SSF has 18,000 jobs in the pipeline over the next 3 years and less than 1,600 housing units in the development pipeline, a 13:1 ratio (when 1.5:1 is considered healthy). We are attaching our BIA Bay Area Monthly Bay Area Jobs-Housing Imbalance report, which measures how the region is performing when it comes to providing adequate jobs and housing based on projections in Plan Bay Area, the San Francisco Bay Area's blueprint for growth. As you will see, almost seven years into the 30-year planning period, the Bay Area remains deeply in the hole when it comes to housing but has blown way past the jobs projections. BIA encourages the City to conduct a thorough outreach to development stakeholders . BIA is ready to work with the City of South San Francisco to fine tune the Inclusionary Ordinance so that it is best able to work for both the City and the building community. Very truly yours, Dennis Martin BIA|BAY AREA 54 71 61 22 54 93 88 227 144 156 110 92 94 277 380 103 223 112 5 4 10 112 4 4 5 37 99 357 PE R M I T T E D U N I T S YEAR YEAR TOTAL UNITS SINGLE- FAMILY MULTI- FAMILY 1990 54 39 15 1991 71 15 56 1992 61 29 32 1993 22 20 2 1994 54 22 32 1995 93 29 64 1996 88 88 0 1997 227 227 0 1998 144 144 0 1999 156 156 0 2000 110 78 32 2001 92 52 40 2002 94 94 0 2003 277 123 154 2004 380 18 362 2005 103 7 96 2006 223 31 192 2007 112 13 99 2008 5 3 2 2009 4 2 2 2010 10 10 0 2011 112 1 111 2012 4 4 0 2013 4 2 2 2014 5 2 3 SOUTH SAN FRANCISCO PERMITTED RESIDENTIAL UNITS: 1990 THROUGH NOV 2017 California Construction Industry Research Board (CIRB) 2015 37 2 35 2016 99 4 95 2017 357 86 271 *2017 is January through November, the months available through CIRB. CITY OF SOUTH SAN FRANCISCO SPEAKER CARD CITY OF SOUTH SAN FRANCISCO SPEAKER CARD To address the City Council, please complete this card and submit it to the City Clerk Speaker comments are limited to three (3) minutes Please uidicate which item you'd like to speak on: 1 " Public Continents, or 2) --_Agenda Item j 1 Name: �' � D A �-h L FZ— Dat� ' ��'�� Pronounced: Address (optional) C1,57 rp- WAII9 A/ D k _1Z, S P q �,4a 9, ' To address the City Council, please complete this card and submit it to the City Clerk Speaker comments are limited to three (3) minutes Please indicate which item you'd like. to speak on: 11 � Public Comments, or 2) Agenda Item Name: M avif e I J Q(\V�'r Date: � � `) � �'j-, - Pronounced: Address (optional 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 A B C D E F G H I J K L M N O P Q R S T U V W X UPDATED BY LISA VORDERBRUEGGEN OF THE BIA/BAY AREA [email protected]: NOV 2017 (Month 83 in 360-month planning period) Baseline housing units in 2010 (Plan Bay Area, 2040*) Total number of units projected by 2040 (ABAG 2040*) Total additional units projected by 2040 Actual number of housing units permitted between JAN 2011 and NOV 2017 (83 months) Number of units that should have built since JAN. 1, 2011, in order to meet projections Housing Deficit/Surplus (number) Housing Deficit/Surplus (percent) Monthly Average Required to Meet Projections Actual Average Actual New Jobs To Housing Permits Ratio Percent achieved for full Plan Bay Area period Baseline employment in 2010 (Plan Bay Area 2040*) Total number of jobs projected (Plan Bay Area 2040*) Total additional jobs projected (Plan Bay Area 2040*) Current total employment (NOV 2017) Number of jobs needed to add since Jan. 1, 2011, to meet projections Actual number of jobs generated since Jan. 1, 2011 (Total current employment minus 2010 baseline) Jobs Surplus/Deficit (Number) Jobs Surplus/Deficit (Percent) Jobs Per Housing Unit Ratio in 2010 (Total jobs / Total units in 2010) Jobs per housing unit ratio in 2040 if Plan Bay Area projections hold up Jobs Achieved As Percentage for full PBA period Actual Time Elapsed in PBA as a Percentage Data explanation box Total MINUS Baseline Units CIRB Monthly Data Compiled Total Additional Projected Units DIVIDED by 360 Months in Planning Period MULTIPLIED by Number of Months Into the Planning Period (83 mos as of NOV 2017) Actual Units MINUS Projected Need for Units Housing Deficit/Surplus DIVIDED by Total Number of Units That Should Have Been Built Total Projected Additional Units DIVIDED by 360 Total Actual Units Divided by Number of Months Into Planning Period (83 months as of NOV 2017) Actual New Jobs / Actual Housing Permits Actual New Housing Units Added Divided by Total Additional Projected Housing Units Total Jobs Projected MINUS Baseline Jobs Per CA EDD Total Additional Projected Jobs DIVIDED by 360-month Planning Period MULTIPLIED by Number of Months Into the Planning Period (83 as of NOV 2017) Total Current Employment MINUS Baseline Employment Actual New Jobs MINUS Projected New Jobs Actual Jobs DIVIDED BY Projected Jobs MINUS 1 Actual Jobs Divided by Total Number of Additional Jobs Projected Number of Months In Period Divided by 360 (83 as of NOV 17) Bay Area 2,608,000 3,426,700 818,700 135,107 188,756 (53,649)-28.4%2274 1627.8 4.7 16.5%3,422,800 4,698,400 1,275,500 4,053,900 294,074 631,100 337,026 114.6%1.31 1.37 49%23% Alameda Co.545,000 734,100 189,100 28,474 43,598 (15,124)-34.7%525 343.1 705,700 953,100 247,400 818,000 NA NA NA NA 1.29 1.30 Contra Costa Co.375,400 475,400 100,000 13,643 23,056 (9,413)-40.8%278 164.4 360,100 497,900 137,800 542,500 NA NA NA NA 0.96 1.05 Marin Co.103,200 111,600 8,400 1,060 1,937 (877)-45.3%23 12.8 121,800 135,000 13,200 140,300 NA NA NA NA 1.18 1.21 Napa Co.48,900 54,700 5,800 1,484 1,337 147 11.0%16 17.9 70,700 83,400 12,700 73,800 NA NA NA NA 1.45 1.52 San Francisco 345,800 483,700 137,900 25,489 31,794 (6,305)-19.8%383 307.1 576,800 872,500 295,700 553,200 NA NA NA NA 1.67 1.80 San Mateo Co.257,837 318,000 60,163 9,265 13,871 (4,606)-33.2%167 111.6 343,300 472,300 129,000 444,600 NA NA NA NA 1.33 1.49 Santa Clara Co.604,300 860,900 256,600 45,675 59,161 (13,486)-22.8%713 550.3 911,500 1,289,900 378,400 1,005,900 NA NA NA NA 1.51 1.50 Solano Co.141,700 169,300 27,600 5,278 6,363 (1,085)-17.1%77 63.6 130,200 151,000 20,800 199,900 NA NA NA NA 0.92 0.89 Sonoma Co.185,800 219,100 33,300 4,739 7,678 (2,939)-38.3%93 57.1 202,700 243,600 40,900 254,000 NA NA NA NA 1.09 1.11 JOBSHOUSING **Assumes that all new permitted units are constructed. Planners typically use jobs per occupied household, which factors vacancy rates. But the number of households in a given geography on a monthly basis is not generally available. Planners typically strive for a ratio of 1.5, or 1.5 jobs for every household. A jobs per housing unit ratio is a rougher but relative measure. Also, adding the units permitted to the 2010 baseline unit number does not account for other local changes that may influence the ratio. Monthly housing unit permit data provided by California Construction Industry Research Board. Monthly jobs data provided by the California Employment Development Department’s monthly labor force data report for counties. * Plan Bay Area 2040 Final Supplemental Report Adopted July 2017, including "Regional Forecast of Jobs, Population and Housin g" and "Land Use