City of Belmont Carlos de Melo, Community Development Director, Thomas Fil, Finance Director,

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1 Meeting Date: January 10, 2017 STAFF REPORT Agency: Staff Contact: Agenda Title: Agenda Action: City of Belmont Carlos de Melo, Community Development Director, Thomas Fil, Finance Director, Discussion of Affordable Housing Policies, Inclusionary Zoning Ordinance and Residential/Non-Residential Housing Mitigation Fees Ordinance and Resolution Recommendation 1) Consider Planning Commission recommendations related to the project. 2) Introduce an Inclusionary Zoning Ordinance. 3) Adopt a resolution adopting Residential and Non-Residential Housing Mitigation Fees. Background The City Council has identified housing as one of the top City-wide priorities. The following actions have been taken related to affordable housing programs in Belmont: On January 14, 2014, the City Council held a study session to review the assets of the Belmont Housing Successor Agency; after discussion, the Council provided direction to staff on disposition and development of the Agency s real property assets. On February 11, 2014, the City Council adopted a Resolution authorizing the City to participate in a future County-wide Housing Nexus Study to support impact fees for Affordable Housing and Inclusionary Housing Requirements. On May 12, 2015, the City Council adopted the General Plan Housing Element, which includes programs and policies to be completed during the planning period. Program 2.1, Affordable Housing Development, Action 4, states that the city shall, Develop and Implement an Inclusionary Housing Ordinance and adopt Housing Impact Fees. In 2015, the City participated in the San Mateo County-wide Affordable Housing Nexus Study that examined the impacts of new development on affordable housing. On August 25, 2015, the City Council held a study session to review the Nexus Study findings, and directed staff to proceed with an Inclusionary Housing and Housing Impact/Linkage Fee Ordinance. On February 23, 2016, the City Council held its first study session to review Housing Impact/Linkage fees. At the study session conclusion, the Council indicated support to implement impact/linkage fees on new residential and commercial development, and general support of the conclusions from the nexus study and feasibility analysis. Page 1 of 5

2 On March 29, 2016, the City Council provided additional direction related to the development of an inclusionary zoning ordinance. On October 4, 2016, the Planning Commission received a presentation on the basic components of an inclusionary zoning ordinance, with information on previous Council direction. At that time, staff indicated that the draft ordinance would return to the Planning Commission for review and recommendation in November. On November 1, 2016, the Planning Commission received a presentation on a draft ordinance. It should be noted that the draft ordinance presented to the Commission included a threshold of 30+ units for residential ownership projects which would require onsite affordable housing production; the Commission recommended this threshold be reduced to 25+ units for triggering on-site production. At the conclusion of Commission discussion on the matter, the Commission adopted a resolution recommending City Council adoption of the ordinance. Analysis In 2014, fifteen San Mateo jurisdictions and Palo Alto jointly hired Strategic Economics and Vernazza Wolfe, Inc. to prepare nexus and feasibility studies for each city and San Mateo County. The impetus behind this effort was the growing concern about the need to identify a funding source for new affordable housing. By studying the relationship between new development and how much affordable housing is needed for new lower income workers, new housing impact fees were calculated. Studies were customized for each jurisdiction, including market data, demographic information and feasibility analysis. Each city received two separate studies: one for residential development and a second for commercial development. When making recommendations, the consultants also ensured that if a city adopts both a residential and commercial fee, the impacts will not be double counted. Impact fees are charges imposed by jurisdictions that can be used to support and build new development. Since the 1970s, California cities have used impact fees to help pay for items like roads, parks and schools. Fees can only be applied to new development projects, and cannot be used for existing problems. Before being adopted, jurisdictions must show that there is a connection between the impacts caused by development and the fees charged. Further, Keyser Marston Associates (KMA) reviewed the findings of the nexus studies and provided input to staff on the feasibility of adopting specific fees. The financial feasibility analysis for residential projects considered the development costs to build new residential projects in Belmont in comparison to market rate home prices and rental unit values. KMA concluded that an affordable housing fee in approximate range of $20-$30/square foot of building area is generally supported by current development economics of residential projects in Belmont. For commercial projects (hotel, retail/restaurant, and office projects), the analysis assesses new housing fees in comparison to fee levels in neighboring jurisdictions as well as fees as a percentage of total development costs. KMA s analysis concludes that a fee on commercial projects in the range of $4 to $12/square foot is supported if Belmont s goal is to keep its total fee burden near the average of its neighboring jurisdictions. Page 2 of 5

3 Surrounding Jurisdictions Current Fee Status ($/SF) Single Family Residential Multi- Family Residential Hotel Retail/Restaurant Office/R&D/Industrial Redwood City $25 $20 $5 $5 $20 San Mateo NA* NA* $10 $5 $25 San Carlos $23 ~ $28 $10 $5 $20 Foster City NA** NA** $12.50 $6.25 $27.5 Belmont (recommended) $20 $4 $5 $12 * uses Inclusionary requirements for both ownership and rental units ** uses inclusionary zoning for ownership units Following the conclusion of the nexus study for the City of Belmont, at the direction of the City Council, staff retained the necessary consultants to prepare an Inclusionary Zoning Ordinance and Housing Mitigation Fee Resolution. The draft ordinance contains a number of components that address affordable housing generally, in addition to the specific sections on inclusionary zoning. For example, the draft ordinance incorporates the findings from the nexus studies on commercial and residential development, and includes options to paying the impact/linkage fees that may result in additional rental or for-sale housing to be constructed. Required Findings Zoning Text Amendments Section 16 of the Belmont Zoning Ordinance (BZO) requires the following: Section 16.1 (Justification) - When in the opinion of the Council a change in this Ordinance is required to achieve the objectives of the Zoning Plan and the General Plan for the City, this Ordinance may be amended by changing the boundaries of any district or by changing any provision hereof in accordance with the procedures prescribed in this Section. Section 16.5 (Action By The Commission) - Within 30 days following the public hearing, or such longer time period as the Council may prescribe, the Commission shall make a specific finding as to whether the change in the district boundaries or of the district regulations is required to achieve the objectives of the Zoning Plan and the General Plan for the City. The only required finding for a Zoning Ordinance amendment is that it must achieve the objectives of the Zoning Plan and the General Plan for the City (Section 16.5). Staff notes that there is no Zoning Plan, per se; however, the Zoning Ordinance contains a purpose statement (Section 1.1) that represents the objectives of the City s zoning regulations: 1.1 PURPOSE The following regulations for the zoning of land within the City are hereby adopted to promote and protect the public health, safety, peace, comfort, convenience and general welfare, and to provide a precise guide for the physical development of the City. Page 3 of 5

4 The adopted Housing Element of the Belmont General Plan contains a series of goals and policies to be implemented by the housing element programs. The proposed amendments comply with the following adopted Housing Element goals, policies, and stated actions. HOUSING PRODUCTION The Regional Housing Needs Determination addresses the need for decent, adequate, and affordable housing to accommodate existing and future housing needs. In order to further these goals, Belmont is committed to assisting in the development of adequate housing that is affordable to all economic segments of the community. GOAL 2: FACILITATE THE DEVELOPMENT OF A VARIETY OF HOUSING TYPES AT APPROPRIATE LOCATIONS. Policy 2.1 Provide residential sites through land use, zoning, and specific plan designations to encourage a broad range of housing opportunities. Policy 2.2 Facilitate the production of affordable housing through appropriate land use designations and flexible development standards. Program 2.1: Affordable Housing Development The Belmont Housing Successor Agency (HSA) manages the low-moderate income real property assets of the former Belmont Redevelopment Agency. However, with limited funding resources, the Housing Successor in transferring or selling the least productive real property assets to ensure ongoing provision or development of affordable housing. The Housing Successor is also the entity responsible for implementation of the Housing Element programs and policies aimed at development of affordable housing. Action 1: Develop a real property Development and Disposition Plan by the end of Action 2: Transfer or sell real property assets to leverage provision and development of affordable housing projects for all income groups including extremely low, very low, and low income households. Action 3: Complete the San Mateo County-Wide Affordable Housing Nexus Study by February Action 4: Develop and Implement an Inclusionary Housing Ordinance and adopt Housing Impact Fees by December Action 5: Ensure ongoing compliance with California Health and Safety Code. Responsibility: Housing Successor Agency (HSA) Funding Source: Housing Successor Fund, Housing Impact Fees Action 1: December 2015 Action 2: Ongoing Action 3: February 2015 Action 4: December 2015 Environmental Clearance (CEQA) Per Public Resources Code Section and CEQA Guidelines Sections and 15061(b)(3), the proposed ordinance is exempt from the requirements of the California Environmental Quality Act (CEQA) in that it is not a project which has the potential for causing a significant effect on the environment. Page 4 of 5

5 Public Notice The City placed public notices in the Examiner/Redwood City Tribune (local newspaper of general circulation) on December 27, 2016, and January 2, 2017 for the scheduled public hearing by the City Council on January 10, Alternatives 1. Refer back to staff for additional information. 2. Take No Action. Attachments A. Draft Ordinance B. Resolution adopting Residential and Non-Residential Housing Mitigation Fees C. November 2015 Nexus Study D. Planning Commission Meeting Minutes November 1, 2016 E. PowerPoint Presentation Belmont Inclusionary Zoning Ordinance & Nexus Study Fees Fiscal Impact No Impact/Not Applicable Funding Source Confirmed: Source: Purpose: Public Outreach: Council Statutory/Contractual Requirement Posting of Agenda Staff Council Vision/Priority Newspaper Notification Citizen Initiated Discretionary Action Other* Plan Implementation* Page 5 of 5