CITY COUNCIL JANUARY 16, 2018 NEW BUSINESS

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1 CITY COUNCIL JANUARY 16, 2018 NEW BUSINESS SUBJECT: INITIATED BY: PREPARED BY: ACCESSORY DWELLING UNITS AS AFFORDABLE HOUSING COUNCILMEMBER LAUREN MEISTER COUNCILMEMBER JOHN D'AMICO COMMUNITY & LEGISLATIVE AFFAIRS DIVISION (John Leonard, Manager)~ (Andi Lovano, Senior Management Analyst~ STATEMENT ON THE SUBJECT: The City Council will consider directing staff to research programs in other jurisdictions aimed at incentivizing the construction of accessory dwelling units for affordable housing and to develop a program for West Hollywood. RECOMMENDATIONS: 1) Direct staff to research best practices for policies and programs to incentivize the construction of accessory dwelling units as affordable housing for lower income households. 2) Direct staff to return to City Council with recommendations for developing such a program in West Hollywood. BACKGROUND /ANALYSIS: Accessory Dwelling Units (ADUs) are known by many names: granny flats, in-law units, backyard cottages, secondary units and more. ADUs are defined as a secondary dwelling unit with complete independent living facilities for one or more persons. ADUs can be detached to, attached to, or repurposed space within the primary structure. ADUs are an innovative, affordable, effective option for adding much-needed housing in California. ADUs are an affordable type of home to construct in California because they do not require paying for land, major new infrastructure, structured parking, or elevators. They are also built with cost-effective one- or two-story wood frame construction, which is significantly less costly than homes in new multifamily infill buildings. A UC Berkeley study noted that one unit of affordable housing in the Bay Area costs about $500,000 to develop whereas an ADU can range anywhere up to $200,000 on the expensive end in high housing cost areas. 1 1 The California Department of Housing and Community Development established a website with more information about Accessory Dwelling Units: Page 1 of 5 AGENDA ITEM 5.E.

2 In addition to savings on construction costs, ADUs can provide several advantages to property owners and community members. They can be a source of income for homeowners. ADUs also give homeowners the flexibility to share independent living areas with family members and others, allowing seniors to age in place as they require more care. ADUs are also a way to build much-needed housing that fits into the neighborhood and is not out of scale with existing developments. ADUs are a critical form of infill development that can be affordable and offer important housing choices within existing neighborhoods. ADUs allow for different uses, and serve different populations ranging from students and young professionals to young families, people with disabilities, older adults, and in-home health care providers. The California Legislature has acknowledged the potential for ADUs to contribute to the housing stock by recently passing several laws - e.g. SB 1069 (Wieckowski), AB 2299 (Bloom), and AB 2406 (Thurmond) - aimed at reducing barriers, better streamlining approval and expanding capacity to accommodate the development of ADUs. At its meeting on January 16, 2018, the West Hollywood City Council will be considering a Zone Text Amendment to revise the City's local accessory dwelling unit regulations to conform with changes to state law. This item directs staff to research best practices for incentivizing the development of ADUs as affordable housing for lower income households and to develop such a program for West Hollywood. By developing incentives to build ADUs with rent restrictions, West Hollywood will embrace an alternative housing model and emerging trend that can contribute to addressing home supply and affordability in California. There are an estimated 2,100 single family homes in West Hollywood, with 350 of these units in the R2, R3, and R4 zone districts. In 2017, there were four applications for ADUs submitted to the City's Planning Division. Though the City does not know the exact number of existing ADUs in West Hollywood, based on the number of existing single family homes and recent ADU applications, it is possible that ADUs are an underutilized resource with great potential. The proposed revisions to the Zoning Code and potential incentives to build ADUs will help encourage ADUs as another option for affordable housing development in the City of West Hollywood. Sample Programs in Other Jurisdictions Many jurisdictions in California - including San Francisco, Berkeley, and Piedmont - and throughout the country have successfully embraced incentive programs for ADUs. Below are a few examples of such programs. Santa Cruz, California has tried to encourage ADUs through incentives and less restrictive regulations. Homeowners constructing ADUs have the ability to have their permit fees waived if they commit to renting their unit to low or very-low income tenants. The city of Santa Cruz also worked with seven architectural firms to create accessory dwelling unit prototype designs. A joint City/Santa Cruz Community Credit Union loan Page 2 of 5

3 program provided up to $100,000 at 4.5% interest to homeowners if an ADU was deed restricted to be an affordable unit. Austin, Texas amended its zoning code in November 2015 to relax the restrictions on the size and scope of accessory dwelling units. In the year prior to the code changes, the city of Austin received 170 permit applications for ADUs and in the year after, the number rose to 227 permit applications. In addition to changing the city's code, Austin has an incentive program for property owners who agree to rent ADUs to lower income households for 5 years after completion. This program, known as the S.M.A.R.T. Housing program - Safe, Mixed-income, Accessible, Reasonably-priced, Transitoriented - provides several benefits to participants, including fee waivers for permitting and some Capital Recovery fees, expedited review through the permitting process, and advocacy in resolving issues that may arise within City departments. Per the program, the ADUs must be rented to households with incomes at or below 80% of the median family income and rent may not be more than 28% of a tenant's household monthly income the unit size. Portland, Oregon is in the process of developing a pilot project to design and install ADUs on four privately-owned properties. A homeless family will live in the ADU rentfree for five years. At the end of that time, homeowners will have unrestricted use of the ADUs. Homeless families will be referred to the program through a coordinated entry system. The homeowners will have no upfront costs and tax abatement for the years the ADU is part of the project. During the five years, the formerly homeless family will receive full social service support through a local service provider with the hopes of gaining safety and stability long-term. Similarly, Los Angeles County has allocated $550,000 to the development of a pilot project as part of the County's Homeless Initiative to explore ways for homeowners to construct ADUs as housing for homeless families and individuals. The pilot program encourages the development of accessory dwelling units by streamlining the permit approvals process, providing technical assistance to homeowners, providing some financing options, and promoting accessory dwelling units through an architectural design competition. The architectural competition is being planned and the goal is to identify the winning projects and finish construction within 18 months. During the pilot phase, the County will provide a maximum subsidy of $75,000 per unit to build two to three new ADUs and a maximum subsidy of $50,000 per unit to preserve two to three existing unpermitted ADUs. The subsidy will be provided in the form of a soft loan or forgivable loan tied to a commitment to rent the ADU to a homeless family/individual or participant in the housing choice voucher program. The hope is that this initial pilot program can be replicated and scaled to attract homeowners in order to increase the stock of affordable housing. West Hollywood is well-known for being a creative and progressive city, including when Page 3 of S

4 it comes to housing and zoning policies. The City of West Hollywood has an Affordable Housing Trust Fund, which was created to off-set development impacts and generate additional resources to meet the increasing need for affordable housing. The funds are historically used by non-profit developers to build or rehabilitate units affordable to lower income households. City staff and the City Attorney should evaluate if the Trust Fund is a possible funding source for an ADU program if the units are set aside as affordable housing. In California and the Los Angeles metropolitan area in particular, there exists a severe lack of housing that is affordable. There is also limited availability of state and federal funding for new affordable housing programs. In this context, West Hollywood can be a leader in implementing creative models of affordable housing, including ADUs, that keep the community stable and provide housing options that are affordable to all socioeconomic segments of the community. CONFORMANCE WITH VISION 2020 AND THE GOALS OF THE WEST HOLLYWOOD GENERAL PLAN: This item is consistent with the Primary Strategic Goal(s) (PSG) and/or Ongoing Strategic Program(s) (OSP) of: PSG-2: Affordable Housing. OSP-1: Adaptability to Future Change. In addition, this item is compliant with the following goal(s) of the West Hollywood General Plan: LU-8: Maintain and enhance residential neighborhoods. H-1: Provide affordable rental housing. H-3: Encourage a diverse housing stock to address the needs of all socioeconomic segments of the community. EVALUATION PROCESSES: The incentive program should include an evaluation process to determine if the incentives provided are an effective way to develop affordable housing units. ENVIRONMENTAL SUSTAINABILITY AND HEAL TH: NIA COMMUNITY ENGAGEMENT: NIA Page 4 of S

5 OFFICE OF PRIMARY RESPONSIBILITY: HUMAN SERVICES & RENT STABILIZATION DEPARTMENT/ RENT STABILIZATION & HOUSING DIVISION FISCAL IMPACT: None at this time. If staff determines that additional funding is necessary to perform this evaluation, they will return to City Council with a request at a later date. Page 5 of 5