STAFF REPORT SAUSALITO CITY COUNCIL

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1 STAFF REPORT SAUSALITO CITY COUNCIL AGENDA TITLE Housing Element Update and Initial Environmental Study/Negative Declaration (GPA/ENV ) RECOMMENDED ACTIONS Staff recommends that the City Council take the following actions: 1. Conduct a public hearing on the approval of the Housing Element Update Initial Environmental Study/Negative Declaration (IES/ND) and adoption of the Housing Element; and 2. Approve the draft resolution which approves the IES/ND; and 3. Approve the draft resolution which adopts the Housing Element Update as a part of the General Plan. SUMMARY The City's Housing Element was adopted on October 9, 2012 and certified to be in conditional compliance with Housing Element Law by the California Department of Housing and Community Development (HCD) on November 7, The adopted Housing Element reflects the unique character of Sausalito while also being responsive to the State's legal requirements by using a multi-faceted approach that has a low impact on the community. The Government Code requires jurisdictions to update their housing element every planning period and obtain certification from the HCD that the element complies with Housing Element law. The current planning period is from (an eight year cycle), provided that the City submits an adopted Housing Element to HCD by January 31, There is a 120 day extension of the statutory deadline available if the City requires it. If the City does not submit to HCD by the statutory deadline, the eight year cycle reverts to a four year cycle, the City's next Housing Element will be due in 2018, instead of 2023 and some of the Regional Housing Needs Assessment numbers from the cycle will carry over into the cycle. The City began the process to update the Housing Element for the cycle in January The City Council appointed a Housing Element Subcommittee to work with Staff and a consultant to complete two required tracks. The first track involved adopting a variety of Zoning Ordinance Amendments, which were pledged in the current 2012 Housing Element. In order to be eligible for certification from the State for the Housing Element cycle, the City was obligated to follow through with these program amendments. The first track was completed in July The second track is to update the current Housing Element and gaining certification by the State by January 31, 2015.The Housing Element must establish goals, policies and programs for the preservation, improvement and development of housing. The State of California mandates the number of new housing units that local jurisdictions must plan for in their Housing Element, with Sausalito required to plan for 79 units (the "Regional Housing Needs Allocation," or RHNA) during our Housing Element cycle. While the City is required to plan for this new housing and the proposed Element continues to follow a low impact strategy including mixed use infill, accessory dwelling units and liveaboards, it is not required to actually build the housing. Page 1 of 19

2 BACKGROUND In September 2013 and January 2014 the Council appointed Mayor Tom Theodores and Councilmember Ray Withy as the City Council representatives and Chair Joan Cox and Commissioner Cleveland-Knowles as the Planning Commission representatives on the Housing Element Subcommittee to work with staff on preparation of the Zoning Ordinance amendments for implementation of the Housing Element ("Track 1") and Update of the Housing Element Update ("Track 2"). On February 25, 2014 Staff updated the Council regarding the Track 1 and Track 2 requirements, the anticipated schedule and timeframes. On March 19 and March 31, 2014 the Subcommittee met to review draft updates to the Housing Element. On March 15, 2014 a Community Workshop was held at the Bay Model to discuss both Track 1 and Track 2. Video from the meeting is on the Housing Element website under "March 15 Workshop". Written responses to questions asked at the Community Workshop are provided on the Housing Element website. On April 22, 2014 Staff updated the Council regarding the Track 1 and Track 2 progress including the preliminary Draft RHNA Strategy for , draft revisions to Housing Element Chapter 1, Chapter 2, Appendix A and Appendix G, in addition to feedback from the March workshop. In July of 2014 the Council adopted the Track 1 Zoning Ordinance amendments for implementation of the Housing Element (Density Bonus, Reasonable Accommodations, Emergency Shelters, Special Needs Housing, and Vertical Mixed Use, "VMU") and a Focused Amendment of the (to remove the HMU program). On September 11, 2014 and September 22, 2014 the Subcommittee met to review draft updates to the Housing Element. The draft updates were all shown in a redlined "track changes" format to easily see the changes from the adopted Housing Element. The Subcommittee forwarded a recommended updated draft Housing Element in redlined form to the City Council for review. On September 20, 2014 a Community Workshop was held to discuss the draft Housing Element (Track 1). Video from the meeting is on the Housing Element website under "Saturday, September 20." On October 7, 2014 the Council reviewed the draft Housing Element and directed staff to send the draft Housing Element to the State HCD on October 7, On October 16, 2014 HCD received the draft Housing Element and began a 60-day review of the document. The State contacted the City's Housing consultant during the review to ask clarifying questions regarding special needs public participation (Chapter I) and various programs (Chapter 2, Appendix B and Appendix D). The consultant made modifications to the draft Housing Element pursuant to HCD's comments (see the section on "HCD Review" in this staff report). Page 2 of 19

3 On November 12, 2014 the Initial Environmental Study/Negative Declaration was released with a public comment period through December 12, On November 19, 2014 the Planning Commission did the following: o Reviewed the Initial Environmental Study/Negative Declaration for the Housing Element Update. There was neither public comment nor Planning Commission direction on the Initial Environmental Study/Negative Declaration at the November 19, 2014 Planning Commission meeting, o Reviewed the Housing Element Update and provided direction (see the "Planning Commission Direction" section in this report). There was no public comment on the Housing Element Update at the November 19, 2014 Planning Commission meeting. On December 16, 2014 HCD sent the City a letter confirming that, with the modifications discussed in the section on "HCD Review" in this staff report, the Element can be certified by the State if adopted by the City (see Attachment 4). On December 17, 2014 the Planning Commission did the following: o Reviewed the Initial Environmental Study/Negative Declaration for the Housing Element. There was no public comment. The Planning Commission voted 4:1 (Cox: No) to recommend City Council approval of the Initial Environmental Study/Negative Declaration for the Housing Element (see Attachment 5 for draft minutes, Attachment 6 for Planning Commission Resolution No , and Attachments for the Initial Environmental Study/Negative Declaration). o Reviewed the draft Housing Element Update. There was no public comment. The Planning Commission voted 5-0 to recommended City Council approval of amendment of the General Plan to incorporate the Housing Element Update (see Attachment 5 for draft minutes, Attachment 7 for Planning Commission Resolution No , and Attachment 10 for the Housing Element Update). HOUSING ELEMENT UPDATE (HOUSING ELEMENT ) OVERVIEW The Housing Element Update for the cycle was completed through HCD's streamlined procedure, building off the existing Housing Element and selectively updating applicable sections and information to reflect changes and new data. All changes to the existing Housing Element are registered as redlined edits. The Council last reviewed the Housing Element on October 7, 2014, at which point the Council directed staff to send the draft Housing Element to the State HCD for review. For ease of comparing the changes since the last time the Council reviewed the Housing Element, the specific changes reguested by the Planning Commission and HCD (see "Planning Commission Review" and "HCD Review" sections at the end of this staff report) are reflected with yellow highlighter in the Element in Attachment 10. In consideration of the comprehensive update of the City's Housing Element completed a little over two years ago (adopted in October 2012), the Draft Element proposes minor updates to the current Housing Element. The focus is on updating the Element's background information (such as income levels and housing allocation), reviewing the City's progress in implementing its adopted Element, and carrying forward the policies and programs from the current Housing Element with minor refinements as needed. Page 3 of 19

4 Organization. The draft Housing Element contains the following chapters and appendices: Chapter I - Introduction Chapter II - Housing Plan Chapter III - Housing Needs Summary Chapter IV - Housing Resources Appendix A - Housing Needs Assessment Appendix B - Housing Constraints Appendix C - Vacant and Underutilized Sites Analysis Appendix D - Housing Element Accomplishments Appendix E - Community Participation Appendix F - Housing Element Glossary Appendix G - Vacant and Underutilized Sites Inventory Outline of Chapters and Appendices Chapter I - Introduction Chapter I provides an overview of the Housing Element process and the procedures for preparing a document that complies with State law. The chapter points to specific State laws as well as the Element's relationship to the General Plan. The "Community Participation Summary" section of this chapter summarizes both workshops held in Chapter II - Housing Plan The Housing Plan chapter contains the Housing Element's established goals and policies. The chapter also lists the implementing programs and objectives, organized under each goal and policy described in the beginning of the chapter. Chapter II also provides a table summarizing the updated implementing programs for the Housing Element update. The only proposed new program in the Housing Plan is the evaluation of a "Junior Accessory Dwelling Unit (ADU)" program. Junior ADUs are small ancillary units created from existing underutilized space in a home, such as an unused bedroom, which can be improved as an independent rental unit. The program would allow the City to explore and evaluate development standards to facilitate the provision of Junior Accessory Dwelling Units, while addressing issues of neighborhood compatibility. Chapter III - Housing Needs Summary Chapter III provides an overview of the data and information used within the Housing Element. The chapter further synthesizes data from Appendix A - Housing Needs Assessment and includes tables and descriptions to summarize updated demographic and housing availability information. Chapter III also provides a synopsis of future housing needs and describing the City's Regional Housing Needs Allocation (RHNA). Chapter IV - Housing Resources The Housing Resources chapter summaries the City's capabilities in addressing the RHNA for the planning period. The chapter provides a comprehensive listing of identified sites within commercial and residential zoning districts while giving a detailed breakdown of housing units allocated across all income levels. Housing units provided by liveaboards and accessory dwelling units are also highlighted in this chapter. Additionally, Chapter IV outlines other factors applicable to the housing within Sausalito. These include an analysis of financial resources, administrative resources, energy conservation opportunities, and availability of infrastructure and public services. Page 4 of 19

5 Appendix A - Housing Needs Assessment The Housing Needs Assessment provides a detailed analysis of the data utilized in the development of the Housing Element update. The assessment draws data from a myriad of sources, presenting detailed tables, graphs, and descriptions of demographics, projections, employment, housing stock, special needs populations, and other housing-related data. Population projections and growth as well as RHNA numbers are also compared to those of other Marin County jurisdictions within this appendix. As part of the Streamlined update, the Housing Needs Assessment was updated in areas where new information was available which, in some cases, remained unchanged from the Housing Element update. Appendix B - Housing Constraints This appendix analyzes and demonstrates factors affecting the City's ability to provide adequate housing. Both governmental and non-governmental constraints are assessed, encompassing factors ranging from land use controls and permitting fees to geographical constraints. Additionally, the appendix details the provisions for various housing types within Sausalito. This draws from the City's unique housing needs as well as requirements from State law (emergency shelters, transitional and supportive shelters, and single-room occupancies). Appendix C - Vacant and Underutilized Sites Analysis The Vacant and Underutilized Sites Analysis demonstrates vacant and underutilized sites within the Sausalito to be added as potential housing sites for development of future units. The appendix also describes the methodology involved in assessing adequate sites and includes recently constructed or entitled projects. Appendix C also includes a table of uncounted liveaboards. Appendix D - Evaluation of Housing Element Accomplishments This appendix fulfills the requirement by Housing Element Law, mandating that jurisdictions assess accomplishments that occurred during the previous Housing Element. Policies, programs, and goals of the Housing Element are assessed by 'effectiveness', 'progress', and 'appropriateness' within this appendix. Appendix E - Community Participation This appendix provides a description of the public participation process in drafting and reviewing the Housing Element. It also contains summaries of questions, comments and concerns raised by the community at the two Community Meetings Workshops. Appendix F - Housing Element Glossary The glossary summaries abbreviations and definitions found throughout the document. There are no substantial edits made to this appendix as part of the Housing Element update. Appendix G - Vacant and Underutilized Sites Analysis This table provides a complete listing of all residential and commercial sites documented within the sites inventory. The appendix provides both a quantitative and qualitative description for each parcel within the inventory, describing attributes such as lot size and APN, zoning, slope, and potential units based on maximum allowed density. The sum of potential housing units per zoning district and for the entire inventory are included in the table. Page 5 of 19

6 It should be noted that the Subcommittee recommended that the Butte/Lincoln site be removed from the inventory due to its current status under review by the Butte Street Task Force for consideration of open space preservation, and the site has been removed from the inventory. To address the housing cycle the City will be using the same plan adopted in October 2012 and updating it with current background information and the City's progress in implementing the adopted Element. The City will be carrying forward the policies and programs from the adopted Element with only minor refinements as needed. While the City is required to plan for housing units, it is not required to actually build the housing. The approach for planning housing units is a low-impact strategy and recognizes the small-town character of Sausalito and the strong desire of the residents to preserve the unique history, character and sense of place. The goal of the Housing Element is to continue to meet State mandates, achieve California Department of Housing and Community Development (HCD) certification, and reflect the values of the community. The adopted approach, which is recommended by the Housing Element Subcommittee with public input to continue into the cycle, is a "Three-Legged Stool," with Accessory Dwelling Units, liveaboards, and crediting of infill site capacity under the City's existing zoning. This strategy acknowledges the built-out, relatively dense pattern of Sausalito, its unique demographics (very high percentage of single-person households), and significant constraints to development of new residential and mixed-use projects. Sausalito is required to plan for 79 housing units (the "RHNA") of varying affordability levels during our housing cycle. The housing plan includes three main strategies, or the "Three-Legged Stool": Accessory Dwelling Units, Liveaboards, and Existing Zoning. Three-Legged Stool Accessory Dwelling Units. Accessory Dwelling Units (ADU's), which are also known as "in-law," "granny," "mother-in-law" or "second" units are an important part of Sausalito's strategy to plan for housing for a diverse range of residents. ADU's provide smaller, more affordable homes throughout the community. The Housing Element will continue to allow and encourage the creation of new ADU's through an Ordinance that was adopted in late 2012 as a form of small scale, contextual infill development that will provide an affordable housing type throughout the City. Due to the City's very high percentage (47%) of single person households, this strategy is ideally suited to Sausalito. The City adopted a program to encourage owners to legalize their existing unpermitted ADU's through March of Based on the success of that program, the Housing Element recommends an additional amnesty period in Liveaboards. An important part of the housing strategy is to allow for the recognition of liveaboards as a locally important form of affordable housing. This strategy is important, in addition to providing much needed affordable housing, in that it relates very strongly to the unique relationship that the community has to the water and the long-standing tradition of marine oriented businesses and activities that have defined Sausalito for over 100 years. Page 6 of 19

7 Existing Zoning ("Infill"). The "infill" strategy simply looks at the community as it is today, applies the existing development rules, and calculates the resultant number of hbmes that could reasonably be provided. The infill strategy does not include any mechanisms that allow existing sites to build larger than they currently can today. For example, a property with a single-family home on a parcel currently zoned for two homes may at some point in time be developed into two homes (through the City's existing rules and regulations). The potential for this additional home can be credited towards the City's target, with no changes to existing zoning. Under the Existing Zoning, or "Infill" strategy, the City does not force the property owner to develop the additional units the property owner remains in control over his or her property. The City is simply crediting the manner in which Sausalito is zoned today towards the RHNA. It is important to keep in mind that this analysis assumes no change in existing zoning designations or standards. Nearly all of the land that is zoned for commercial purposes in Sausalito allows for residential uses on the upper floors. This form of mixed-use infill development is an ideal way for the City to utilize its existing stock of parcels served by existing roads, water and sewer services. Residents over the stores or offices on the ground floor provide passive security for the area, provide a built-in customer base, and create more activity and vitality within commercial areas. This form of mixed-use is very traditional and fits in nicely with the historic development pattern in the commercial areas of Sausalito where a number of apartments and flats exist above the street level retail spaces. The Vertical Mixed-Use (VMU) program is a part of this mixed-use approach. The Housing Goal In terms of the City's proposed housing plan, the housing unit numbers for each of the strategies and contribution towards the total housing goal breakdown as follows (also see Table 1 below): ADUs: Creation of 16 new ADU's account for 6% of the total housing goal. This equates to approximately two ADUs per year for the eight years of the planning period, assuming an adopted and certified Housing Element by the beginning of In addition, legalization of 24 existing ADU's to be credited towards meeting the City's housing goals in the eight year cycle. This represents 10% of the total housing goal. Liveaboards: A total of 31 liveaboard units are counted towards meeting the City's housing goals; or 12% of the total housing goal. Existing Zoning ("Infill"): A review of all the parcels within the City with residential zoning in place, yielded a total of 68 parcels that are considered good candidates for potential additional units in the future under the existing zoning. On these parcels, it is estimated that 128 new residential units could be built in the future, counting towards 52% of the total housing goal. There are 19 parcels that were identified as good candidates for mixed-use development. Some sites would support adding new residences above existing buildings, where other sites could be a complete redevelopment of the site with all new buildings. A third category would be existing second floor office space that could be converted to residences. There are 51 units in this category, which represents 20% of the total housing goal. Page 7 of 19

8 Existing Zoning Table 1: F:hna Unit.s and Housing Objective Income Levels Very Low Low Above Moderate Moderate Totals % Total Units RHNA Targets R Residential % R District % R % Commercial District % Liveaboards % Accessory Dwelling Existing and New Units % Totals "Buffer" (over/under capacity)* The "Buffer" As identified previously, Sausalito is required to plan for 79 housing units (the RHNA) of varying affordability levels during our housing cycle. The current strategy identifies the opportunity for 250 housing units, which includes a "buffer" of 171 units. Most of these potential units are simply a reflection of what is allowed under current zoning and General Plan designations. In addition to identifying enough housing sites to meet the RHNA, most cities identify additional site capacity within the Housing Element sites inventory. These additional sites are referred to as the "buffer." In Sausalito's case, these "buffer" units can be counted without adding any further development regulations we are taking credit for existing zoning and programs already in place. There is no downside to identifying these "buffer" units, and to the contrary, there are many benefits: Provision of additional sites and units over and above the RHNA provides a degree of protection for the city. This includes situations where projects that are approved at reduced densities do not trigger an immediate need to amend the Housing Element to identify new sites to make up the newly created shortfall in the sites inventory1. For example, a sites inventory with capacity for 79 units to address a RHNA of 79 units could have negative consequences. If a development project on a parcel included in the sites inventory with 20 units was approved for fewer units, this would generate the need for 1 Pursuant to "No Net Loss" Zoning Law (Govt Code Section 65863), jurisdictions are not permitted to reduce the residential density for any parcel identified in the Housing Element sites inventory unless they can make written findings that the remaining sites are adequate to accommodate the RHNA. If a reduction in residential density for any parcel would result in the remaining sites in the Housing Element not being adequate to accommodate the RHNA, the jurisdiction may only reduce the density on that parcel if it identifies sufficient additional, adequate, and available sites with an equal or greater residential density so that there is no net loss of residential unit capacity. Page 8 of 19

9 identification of a new site to replace the lost potential units. This new site would need to be rezoned for an increased density as all of the sites with existing zoning that can support additional units have already been utilized.. With the buffer, the City actually has more flexibility in approving "smaller" projects on sites. Additionally, some sites may be found to be unsuitable for new development based on discovery of site constraints. A buffer provides a basis for a reasonable argument that other sites on the inventory are still adequate to meet the RHNA. Vertical Mixed-Use Program Since the majority of the concern and confusion in the community related to the Housing Element appears to center around the VMU program, an analysis of the program has been provided by staff. What is the VMU Program? The VMU program was approved by the City Council on October 9, 2012 with the adoption of the Housing Element. The City Council adopted a Focused Amendment to the Housing Element on July 15, 2014 which, along with other modifications, amended the VMU program to allow a provision for small second story commercial within the VMU program. The VMU program was implemented by the Council on July 22, 2014 with the adoption of Ordinance No which amended the Zoning Ordinance to include the VMU regulations outlined in the Housing Element, as amended. No modifications to the VMU program are proposed as part of the Housing Element. Housing Element Program 8, the Vertical Mixed Use (VMU) program, facilitates affordable upper story residential use above ground floor commercial (i.e., "vertical" mixed-use), which addresses the State's requirements and is considered a low-impact strategy to provide additional housing opportunities. The VMU program was committed to in the current Housing Element and an Ordinance to implement the program was adopted in July of The VMU program is applied within the CN-1 ("Neighborhood Commercial", i.e., the mixed-use commercial districts in Old Town on Second Street and along Bridgeway between Spring and Easterby), CR, ("Mixed Commercial & Residential", i.e., the mixed-use commercial district along Caledonia Street) and CC (Central Commercial", i.e., the mixed-use commercial district downtown Sausalito along Bridgeway) zoning districts. Prior to the VMU program, property owners in the CC, CR and CN-1 Zoning Districts had an option of either a commercial use or a residential use on levels above the ground floor. The VMU program now requires (for new construction or conversion of existing space) residential use on levels above the ground level without the option for commercial use. The program expands upon the requirements which were already in place for the CR zoning district on Caledonia Street. Residential uses were allowed under Sausalito's Zoning Ordinance within these commercial zones prior to the adoption of the VMU. However, the VMU regulations better facilitate the provision of a mix of both market rate and affordable units within small commercial infill sites. The VMU program does not alter the permitted density, height or floor area already allowed within Sausalito's commercial districts. Sausalito's VMU requirements, adopted by the City Council on July 22, 2014, are summarized as follows: New construction of 2nd and 3rd stories is limited to residential use with the following exceptions which may be considered by the Planning Commission: Page 9 of 19

10 To allow the expansion of an existing business. To provide for commercial uses of less than 1,000 square feet. If the property owner can demonstrate a financial hardship. A minimum of one unit must be affordable. Projects with 6 or more units must provide 20% affordable units. Building Permit fee waivers for affordable units will be provided. Affordable units must have a minimum of two bedrooms to accommodate families. The conversion of existing upper story residential uses to commercial uses is prohibited. Why is the VMU Program Required? Government Code Section65583(c)(2) requires that jurisdictions, in their Housing Elements, provide a program to: Assist in the development of adequate housing to meet the needs of extremely low-, very low-, low-, and moderate-income households. Because housing affordable to these income groups is not being produced by the private realestate market, the City's program needs to facilitate the construction of such housing and ensure its continued affordability through deed restrictions. Affordable, deed restricted units can only be sold or rented to a buyer or tenant whose household meets certain income requirements and at a price that is affordable to that household. What Specific Requirements Does the VMU Fulfill? Is the only program in Sausalito's Housing Element which facilitates the construction of affordable, deed restricted housing.2 Facilitates housing development within commercial districts. Without the residential requirement of the VMU program, the capacity of the mixed-use commercial sites would be substantially diminished.3 Addresses the statutory requirement to provide multi-family rental housing.4 By requiring the affordable units provided to have a minimum of two bedrooms, also addresses the need to provide housing for families.5 In summary, the VMU program mainly contributes to the Housing Element in two ways: It facilitates housing development within commercial districts; without the upper level residential requirement of the VMU program, the capacity of the mixed-use commercial sites would be substantially diminished and the 51 units that are allocated to fulfilling the commercial district component in the "existing zoning" row of Table 1 above would be reduced significantly. Much more importantly, it fulfills a statutory program requirement to assist in the development of affordable housing for lower and moderate income households. It is 2 Govt Code Section 65583(c)(2) requires the housing element to include programs to assist in the development of adequate housing to meet the needs of extremely low, very low, low and moderate income households. 3 Govt Code Section (c) requires that the projected residential development capacity of the sites identified in the housing element can realistically be achieved. The number of units calculated shall be adjusted as necessary, based on land use controls and site improvement requirements identified in 65582(a)(4). 4 Govt Code Section (c) requires sites to be identified to facilitate and encourage the development of a variety of housing types for all income levels, including multifamily rental housing. Govt Code Section 65583(a)(7) requires an analysis of special housing needs, including those of large families, and an appropriate program response to address those needs. 5 Ibid. Page 10 of 19

11 important to keep in mind when discussing the "buffer" issue that the VMU program not only adds units to the housing goal, but also separately fulfills a statutory program. What does the VMU program NOT do? There are no density increases. The VMU program does not change the permitted density on any parcel it does not increase or decrease density. Prior to the VMU adoption residential uses were permitted on all parcels in the CN-1, CR and CC Zoning Districts. For example, a parcel that was permitted a maximum of 3 units is still permitted a maximum of 3 units this has not changed. There are no height or size increases. The VMU program does not change the maximum height a building can be built or the maximum allowable buildable areas for any parcel. Additionally, the process for reviewing and approving remodels or new buildings did not change with the VMU program. What are Options to Modify VMU? Questions were raised during the VMU adoption hearings regarding modifying the VMU's applicability to various zoning districts throughout the City. Staff does not recommend modifying the VMU program by removing any of the sites or mixed-use commercial districts for a variety of reasons: The program has already been reduced in scope. Through the VMU adoption hearings in the summer of 2014, the program was reduced in scope and modified to allow for an exception to the regulations to allow for small upper level commercial spaces. As the program stands, there are very few viable sites in the CN-1 and CR Zoning Districts to support affordable housing. In both the CN-1 and CR Zoning Districts there are only two sites large enough to support 6 or more units. There are no sites in the CC Zoning District that are listed in the sites inventory. See Table 2 below: Table 2: Commercial Sites and Associated Units in the Sites Inventory (Appendix G) Total Num ber of Sites in Inwentory That Can Add Additional Units Mixed Use Commercial District Total Number of Sites in Inventory 1 unit max 2 units max 3 units max 4 units max 5 units max 6 units max 7 units max CN-1 (Old Town) CN-1 (Spring Valley) CR (Caledonia) CC (Downtown) Totals The VMU program was designed to fulfill the State's required program to assist in development of adequate housing to meet the needs of extremely low, very low, low and moderate income households, and is the only program in the Housing Element that fulfills this program requirement. Although the VMU program was not specifically designed to address the RHNA, to provide a complete analysis on the impact on the RHNA if one or more of the mixed-use commercial districts were removed from the VMU program, Table 3 (next page) was developed. The table illustrates the impact on the RHNA that removing the CC, CR or CN-1 zoning districts would have on the RHNA. The CN-1 analysis is provided both as a complete district and a separate analysis for both Old Town and Spring Valley zoning districts alone. 8 units max Page 11 of 19

12 Table 3: RHNA Scenarios With Modifications to VMU RHNA Approach As Proposed in Draft Housing Element RHNA without CN- 1 RHNA without Old Town CN-1 RHNA without Spring Valley CN-1 RHNA without CR RHNA without CC (NO CHANGE) Income Levels Very Low Low Moderate Above Moderate Totals RHNA Targets Residential Commercial ADUs Liveaboards Totals "Buffer" Commercial District without CN Totals "Buffer" (over/under capacity)* Commercial District without Old Town CN G Totals "Buffer" (over/under capacity)* Commercial District without Spring Valley CN S Totals S "Buffer" (over/under capacity)* 2? Commercial District without CR Totals Q 230 "Buffer" (over/under capacity)* G Commercial District without CC Totals "Buffer" (over/under capacity)* In each of the scenarios above, ADUs, liveaboards and residential capacity have been eliminated to highlight the changes to the RHNA with each modification to in the commercial district capacity Page 12 of 19

13 What are Options to Eliminate VMU? If the VMU were eliminated from the Housing Element a replacement program which meets all of the requirements that the VMU fulfills would have to be adopted prior to the elimination of the VMU program. If a replacement program deemed viable by HCD were not adopted and implemented, the Housing Element would no longer fulfill the statutory requirements and thus would not be certified by the State. The VMU is the sole program in Sausalito's Housing Element that addresses assisting in the development of affordable housing for lower and moderate income households. Because Sausalito does not have the financial resources to directly assist in the construction of affordable housing, the City needs to have a program that addresses the production of affordable units and the VMU satisfies this requirement. There have been a number of suggested programs for potential replacement of the VMU program. Staff has provided an analysis in Table 4 below of each of the suggested programs, and provided an explanation for why they would not qualify as programs to address the production of affordable units to replace the VMU program: Table 4: Analysis of Suggested Alternative Programs No. Suggested Program Description Could it Replace the VMU Analysis 1 Greater reliance on ADUs and Liveaboards Program? No. This would not qualify as a program to replace the VMU program. While ADUs and liveaboards may in many instances be affordable, State HCD has made it clear that exclusive reliance on these two methods to meet the City's lower income RHNA requirements would fail to meet the statutory requirements for providing sites for a variety of housing types. Sausalito's infill strategy is a critical component of the City's ability to demonstrate adequate sites for a variety of housing types, including multi-family rental housing and housing for families. Elimination of the VMU requirement for second story residential use in the majority of the City's commercial districts would substantially reduce the multi-family infill site capacity identified in the Housing Element and would not provide the necessary mix of sites to address the statutory requirement for a variety of housing types In terms of fulfilling the statutory requirement for assisting in the development of affordable housing, the "development" of new ADUs and liveaboards in Sausalito is not currently deed restricted as affordable, and not all such-units would be affordable to lower income households. While the City could potentially establish an affordability requirement, such a regulation would need to be evaluated as a constraint in the Housing Element as it would likely impede production. On a statewide basis, most jurisdictions seeking to facilitate production of ADUs have eliminated affordability requirements for this reason. Page 13 of 19

14 Table 4: Analysis of Suggested Alternative Programs No. Suggested Could it Analysis Program Replace the Description VMU 2 Utilize junior second units 3 City provides letter of credit in support of a third party loan for development of affordable housing 4 Utilize the existing Density Bonus ordinance Program? No. This would not qualify as a program to replace the VMU program. No. This would not qualify as a program to replace the VMU program. No. This program does not qualify as a program to replace the VMU program. The City does not have an ordinance in place and has no track record of producing junior second units. Similar to ADUs, unless they are deed restricted, a junior second unit program would not meet the standard of assisting in the development of affordable housing, and imposition of a deed restriction would likely constrain production. Provision of a letter of credit by the City to guarantee some or all of a developer's financing for an affordable housing project does not provide funding for development. In addition, most sources of affordable housing funding available through the state and federal government do not require a letter of credit from the City. While provision of a letter of credit may in certain circumstances serve to support access to financing, the program on its own is not seen as effective enough to fulfill the statutory requirements to "assist in the development of adequate housing to meet the needs of extremely low, very low, low, and moderate income households." Since the Density Bonus is State law and optional on the part of the applicant, it does not on its own fulfill the Housing Element requirement of assisting in the development of affordable housing. In addition, Sausalito does not have a track record of producing affordable housing through use of density bonuses. Page 14 of 19

15 Table 4: Analysis of Suggested Alternative Programs No. Suggested Program Description Could it Replace the VMU Analysis 5 Establish an inclusionary housing ordinance and in-lieu fees. Program? Potentially could qualify as a program to replace the VMU program at some point in time, but not for this Housing Element cycle Adopting an ordinance to require a minimum percentage of low and moderate income deed restricted units in new development could address Housing Element requirements to assist in the development of affordable housing, and is a regulatory tool utilized by the majority of jurisdictions in Marin County. The City would however need to have an adopted Inclusionary Ordinance in place prior to elimination of the VMU requirement to ensure fulfillment of statutory requirements to "assist in the development of adequate housing to meet the needs of extremely low, very low, low, and moderate income households." 6 City partnership with non profit, such as Rotary Housing No. This would not qualify as a program to replace the VMU program. The City's draft Housing Element includes Program 18 "Inclusionary Housing Regulations" with an objective to initiate a Nexus and In-Lieu Fee Study by 2018, and develop inclusionary housing regulations as appropriate. Should Sausalito adopt an inclusionary housing ordinance that facilitates the production of lower and moderate income housing, the City could consider eliminating the VMU requirement and.amend the Housing Element at that time. Program 15 in Sausalito's draft Housing Element "Partnerships for Affordable Housing" indicates the City will explore partnerships with a variety of affordable housing providers, utilizing the Nonprofit Housing Association of Northern California as a resource. This program on its own is not a sufficient strategy to fulfill the statutory requirements of assisting in the development of affordable housing. In order to serve as an adequate program to potentially replace the VMU requirement, the program would need to contain specific funding commitments and time frames for local financial assistance, land donation, regulatory incentives, and other implementation details to achieve the production of affordable housing. Other programs which were previously considered and rejected that would fulfill the State's requirements included an Affordable Housing Overlay Zone, which is a zoning tool to allow for increased density on particular properties in exchange for requiring deed-restricted affordable units. This approach was explored during the prior Housing Element update and was ultimately rejected by the community and the City's decision-makers in Ultimately, the VMU program was seen as the best option consistent with the City's policy objectives of implementing a low-impact sites strategy without requiring rezoning sites with higher density than currently allowed. Page 15 of 19

16 HCD REVIEW Pursuant to City Council direction on October 7, 2014, the City sent the draft Housing Element to HCD on October 16, 2014 for a 60-day review. The State contacted the City's Housing consultant during the review to ask clarifying questions regarding special needs public participation (Chapter I) and various programs (Chapter 2, Appendix B and Appendix D). The consultant made modifications to the draft Housing Element pursuant to HCD's comments and concerns including: Public Participation (Chapter 1): a more robust explanation of how the City reached out to the special needs segment of the community was added. Emergency Shelters (Chapter 2; Appendix B and D): o Capacity: a statement regarding adequate capacity in the Es-Overlay District was added. o Management Plan: The State HCD requested specific changes to the Management Plan section in the City's Emergency Shelter Ordinance that was adopted in July The City is not allowed to: require that the Management Plan be "approved" by the City; require that a shelter operator provide all of the services listed in the management plan; require an Annual Report. o To address this issue, language has been added in Chapter 2 and Appendix B indicating that the City will need to amend Section of the Municipal Code as follows: a) amend Sausalito Municipal Code Section (Management Plan) to remove the words "for approval" in the sentence "Prior to commencing operation, the shelter operator shall provide a written management plan to the Director for approval" and add the words "(to the extent such services are required)" after the phrase "The management plan shall address"; and b) eliminate Sausalito Municipal Code Section (Annual Report). Programs (Chapter 2): clarifying language to the objectives for Programs 1, 4, 7, 10, 23 and 27 has been added. These changes have been redlined and highlighted in the text. PLANNING COMMISSION REVIEW Pursuant to Planning Commission direction at the November 19, 2014 Planning Commission meeting the term "new construction goal" and "new construction objective" in Chapter 2 and Appendix D has been changed to "RHNA Objective." This change is reflected in redlines and highlights in the text. HCD CERTIFICATION Jurisdictions in the Bay Area are required to adopt their Housing Elements by January 31, There is a 120 day grace period after the deadline (to May 31, 2015), during which time the City is allowed to adopt a Housing Element and submit it to the State without the penalty of having to update the Housing Element in 4 years time, thus securing the normal 8 year cycle. However, the deadline to gain certification by State HCD is January 31, 2015 (there is not a grace period for certification). Therefore, if the City does not adopt a Housing Element by January 31, 2015 the City will lose Housing Element certification and not have a certified Page 16 of 19

17 Housing Element until such time that the City adopts and Element and receives certification by the State. See Attachment 8 for the importance of Housing Element certification. ENVIRONMENTAL REVIEW The Housing Element Update covers the planning period from January 31, 2015 to January 31, 2023 relative to the maintenance and development of housing to meet the needs of existing and future residents. The General Plan Amendment to incorporate the Housing Element Update is a "Project" under the California Environmental Quality Act (CEQA) and is subject to the guidelines and regulations of the CEQA. Therefore an Initial Environmental Study was prepared that addresses the direct, indirect, and cumulative environmental effects associated with the Project. CEQA environmental review contains different levels of analysis depending on the nature of the project. The amendment of the General Plan to incorporate the Housing Element Update is evaluated as a project under CEQA and any future projects implementing the Housing Element will be analyzed under CEQA to determine the required level of environmental review. Categorical Exemption: CEQA allows for categorical exemptions from environmental review, due to project-specific factors. If the project qualifies for an exemption, no further environmental review is required. (There are no categorical exemptions for the General Plan Amendment to incorporate the Housing Element Update.) Initial Environmental Study: If the project is not exempt from environmental review, an Initial Environmental Study (IES) is prepared to determine the level of impacts. Negative Declaration: If there are no potentially significant impacts, a Negative Declaration (ND) is prepared. Mitigated Negative Declaration: If there are potentially significant impacts that can be reduced to a less-than-significant level through mitigation measures, a Mitigated Negative Declaration (MND) is prepared. Environmental Impact Report: If there are potentially significant adverse impacts that cannot be reduced to a less-than-significant level through mitigation measures, an Environmental Impact Report (EIR) is prepared. The Housing Element Update carries forward many of the programs contained in the 2012 Housing Element and is consistent with other City policies related to environmental protection. There are no land use changes proposed and no alteration to density or development standards proposed by the Housing Element Update. The environmental review of the proposed Housing Element Update resulted in an Initial Environmental Study/Negative Declaration (see Attachment 9). The public comment period was from November 12-December 12. During the public comment period four items of correspondence were received by community members, which were responded to by staff (see Section 6 in the Initial Environmental Study/Negative Declaration in Attachment 9). On December 17, 2014 the State of California Governor's Office of Planning and Research indicated that the City complied with the State Clearinghouse review requirements for draft environmental documents pursuant to the California Environmental Quality Act and no state agencies submitted comment by the close of the review period (see Attachment 4). Why a Negative Declaration Instead of an EIR? As noted above a Negative Declaration is utilized to comply with CEQA when there are no potentially significant impacts caused by the project. In order to determine whether there are any such impacts which would require the preparation of an EIR the City must determine whether it can be fairly argued based on substantial evidence in light of the whole record that the project (in this case the Housing Element Update) may have a significant effect on the environment. California Public Resources Code Sections 21080(d) and (d); 14 Cal. Code of Regulations Sections and Page 17 of 19