DIRECTOR: This item was continued from the April 18, 2018 and May 23, 2018 City Council Agendas and renoticed.

MEETING DATE: June 13, 2018 PREPARED BY: Laurie Winter, Associate Planner DIRECTOR: Brenda Wisneski DEPARTMENT: Development Services CITY MANAGER: Karen P. Brust SUBJECT: Public Hearing to review and consider the introduction of City Council Ordinance No. 2018-03, titled An Ordinance of the City Council of the City of Encinitas, California, Adopting Amendments to Title 24 (Subdivisions) and Title 30 (Zoning) of the Encinitas Municipal Code, Which Proposes Changes to the City s Inclusionary Housing Regulations to Better Address the Need for Affordable Units Reserved in New Residential Development Projects and adoption of Resolution No. 2018-57 approving an off-cycle budget appropriation of $23,500 to prepare a nexus study, gap analysis, and economic feasibility analysis. This item was continued from the April 18, 2018 and May 23, 2018 City Council Agendas and renoticed. CASE NO: 15-162 ZA/LCPA; LOCATION: Citywide. RECOMMENDED ACTION: 1. Conduct the public hearing; 2. Introduce City Council Ordinance No. 2018-03, titled An Ordinance of the City Council of the City of Encinitas, California, Adopting Amendments to Title 24 (Subdivisions) and Title 30 (Zoning) of the Encinitas Municipal Code, Which Proposes Changes to the City s Inclusionary Housing Regulations to Better Address the Need for Affordable Units Reserved in New Residential Development Projects. (Attachment 1); 3. Adopt Resolution No. 2018-57 (Attachment 2) approving an off-cycle budget appropriation of $23,500 to prepare a nexus study, gap analysis, and economic feasibility analysis; and 4. Direct staff to prepare the following studies: a. Nexus Study to evaluate establishing a fee for projects with less than 7 units (1-6 units and/or fractions). b. Gap Analysis to evaluate establishing an in-lieu fee for projects of 7 or more units. c. Economic Feasibility Analysis to evaluate increasing the percentage requirement for affordable units (citywide and upzoned sites). STRATEGIC PLAN AND WORK PROGRAM: This agenda item relates to the Community Planning Focus Area of the City s Strategic Plan. This effort supports the goal of Pursue a range of diverse housing opportunities balanced throughout the community. 1849\03\2336305.1 2018-06-13 Item 10B 1 of 84 4/3/2018 1

FISCAL CONSIDERATIONS: To date, a total of $8,289 has been spent on legal services provided by Goldfarb & Lipman related to the update of the Inclusionary regulations. The project currently has a balance of $41,711 remaining in the Inclusionary Housing Ordinance CIP (WC15E-STUDIESWP) budget. Staff recommends the City Council direct staff to prepare a nexus study/gap analysis ($28K) and economic feasibility analysis ($37K). Based on discussions with consultants who prepare such studies (nexus, gap analysis, and economic feasibility analysis), the studies together will cost approximately $65K to complete. As such, staff anticipates that an additional $23,500 is needed. Adoption of Resolution No. 2018-57 would authorize an off-cycle budget appropriation of $23,500 from the unreserved balance of the General Fund to prepare a nexus study, gap analysis, and economic feasibility analysis. Upon appropriation of the project funding, staff will initiate the proposal process consistent with the City s Purchasing and Contracts Policy. BACKGROUND: Inclusionary zoning, also known as inclusionary housing, is the ability of local governments, under their police power, to require that a given share of new residential construction be affordable to households with very low-, low- or moderate incomes. The purpose of inclusionary codes is to ultimately further the availability of the range of housing choices for households of all income levels in all areas of the City. At its meeting of February 14, 2018, the City Council held a public hearing to review and consider a Draft Inclusionary Housing Ordinance. The City Council received the information, took public testimony, deliberated, and directed staff to schedule a less formal interactive Council workshop. The workshop was to be conducted jointly with the Planning Commission to discuss inclusionary/affordable housing and to include but not be limited to, affordable housing advocates, Building Industry Association and citizens. The City Council also appointed a subcommittee consisting of Council Members Kranz and Muir to work with the City Manager to plan and schedule a date for the workshop regarding the draft inclusionary ordinance. On March 7, 2018, the City Council held a Special Joint City Council and Planning Commission meeting to conduct an inclusionary housing public workshop with a panel of experts specializing in inclusionary housing and Lisa Shaffer, as the workshop facilitator. The panel consisted of the following professionals: PANELIST Paul Barnes Debbie Fountain Sue Reynolds Jim Schmid TITLE Division President, Shea Homes San Diego Housing and Neighborhood Services Director, City of Carlsbad President and CEO, Community Housing Works Founder and CEO, Chelsea Investment Corp. The purpose of the workshop was to discuss the various types of inclusionary housing policies that are likely to create the most high-quality units for low- and very-low income homeowners and recommend which polices should be included in the Draft Inclusionary Housing Ordinance. At the workshop, the City Council and the Planning Commission received presentations from the panelists and received public comment/question cards from three members of the public. The presentations and public comments/questions are included herein as Attachment 4 and Attachment 5. At the conclusion of the workshop, the City Council and Planning Commission provided direction to staff on a number of inclusionary housing policies, which are further described in the Discussion and Analysis below. 1849\03\2336305.1 2018-06-13 Item 10B 2 of 84 4/3/2018 2

DISCUSSION AND ANALYSIS: Based on the City Council and Planning Commission s direction to staff regarding a number of inclusionary housing policies, staff recommends that amendments to the inclusionary regulations be phased. Phase I would address some of the core components of the inclusionary regulations. Phase II would include potential amendments that require technical studies be conducted to justify potential fees. An economic feasibility study could be completed for properties upzoned to the higher density and/or citywide to address a higher percentage for affordable units. In addition, a nexus study and gap analysis could occur at the same time to establish a citywide in-lieu fee for projects with seven (7) or more units and set a citywide fee for projects with less than seven (7) units. Upon completion of the studies, another amendment to the inclusionary regulations could be considered based on the results of the studies and Council direction. Each phase is described below. A. Phase I The following table provides a comparison of the existing and proposed inclusionary regulations. Based on direction received at the March 7, 2018 Inclusionary Housing Workshop and public comments received after the item was continued from the April 18, 2018 City Council meeting, modifications are proposed to the draft ordinance as outlined in red strikeout/underline, which was considered at the February 14, 2018 meeting. All proposed modifications to the proposed draft ordinance are shown in red strikeout/underline in Attachment 3 and have been incorporated into a clean copy of the Draft Ordinance, which is attached herein as Attachment 1. COMPARISON OF EXISTING AND PROPOSED REGULATIONS PROVISIONS EXISTING ORDINANCE PROPOSED DRAFT ORDINANCE Project Applicability Applies to projects proposing 10 or more lots or 10 or more dwelling units. Applies to projects proposing five seven or more units. Ownership Development Reserved Affordable Units Rental Development Reserved Affordable Rental Units Alternative Compliance Options Accessory Dwelling Units The number of units required shall be equal to one unit for every 10 lots or 10 dwelling units in the proposed development. Affordable units must be affordable to very low and low income households. Not addressed in Ordinance; however, is allowed based on changes in state law. 15% of the total dwelling units are available to low income households. Developer Option 1-10% of the units are available to very low income households. Developer Option 2-20% of the dwelling units are available to moderate income households. 15% of the units are available to low income households. No Yes Applicant can construct up to five (5) ten (10) accessory dwelling units to satisfy the inclusionary requirement. Affordability shall conform with rental affordable units. 1849\03\2336305.1 2018-06-13 Item 10B 3 of 84 4/3/2018 3

COMPARISON OF EXISTING AND PROPOSED REGULATIONS PROVISIONS EXISTING ORDINANCE PROPOSED DRAFT ORDINANCE Off-site Construction of Affordable Units No Yes Applicant can build some or all of the inclusionary units associated with one project at an alternative site(s). Preservation or Conversion of Existing Units Rental Units in Ownership Development In-Lieu Fees Affordable Housing Credits Other Alternative Compliance Methods No No Yes - Applicant can pay in-lieu fee rather than construct the affordable unit. No No Yes Preservation of existing units at risk of loss or by conversion of market-rate units to affordable IF City can obtain RHNA credit. Yes Provide 1015% of the dwelling units at very low income. Yes - Allows applicant to pay an in-lieu fee rather than construct affordable unit and requires applicant to provide an Affordability Gap Analysis unless City has adopted in-lieu fees. Yes A developer who constructs a surplus affordable unit may utilize that surplus affordable unit to satisfy the affordable housing requirement for future residential development for a period of no more than five (5) ten (10) years after issuance of the certificate of occupancy for the surplus affordable unit. Yes Applicant may propose an alternative compliance method, including land dedication, to provide affordable units through other means. Requires approval by decision-making body. Dedication of Land No Yes Land donation may be considered as an alternative to paying the in-lieu fee or providing the affordable units within the residential development. This alternative has been reincorporated into the draft Ordinance. Other Continued Affordability Timing of Construction of Affordable Units Affordable Housing Plan Affordable Housing Guidelines No No No No All affordable units shall remain affordable to targeted income group in perpetuity for minimum of 55 years. The City may not approve final inspections or certificates of occupancy for more than 50% 75% of the market rate units until it has issued final inspections or certificates of occupancy for all of the affordable units. Applicants are required to prepare an Affordable Housing Plan which describes how the project complies with the provisions of the Ordinance and include the Affordability Gap Analysis for those projects proposing an in-lieu fee. Staff will develop Affordable Housing Guidelines to provide details on procedures and criteria for implementing the regulations; however, the regulations can be implemented prior to development and approval of the Guidelines. 1849\03\2336305.1 2018-06-13 Item 10B 4 of 84 4/3/2018 4

Phase II An economic feasibility study could be completed for properties upzoned to the higher density and/or citywide to address a higher percentage for affordable units. In addition, a nexus study and gap analysis could occur at the same time to establish a citywide in-lieu fee for projects with seven or more units and set a citywide fee for projects with less than seven (7) units. At its meeting of May 17, 2018, the Planning Commission expressed their support of an inclusionary percentage greater than 15 percent for upzoned sites. At its meeting of June 7, 2018, the Planning Commission recommended that affordable units be constructed on site for upzoned sites. In-lieu fees shall not be offered. The studies are detailed below: Nexus Study Conduct a nexus study to consider applying a set fee for a project that proposes less than seven (7) units or fractions (in lieu of rounding up for projects of 7 or more units require a fee for any calculations that result in a fractional unit). Economic Feasibility Analysis Conduct an economic feasibility analysis to fully assess if an inclusionary percentage greater than 15 percent is desired on upzoned sites (or citywide) and to ensure that the higher requirement does not impede development, which could raise concerns by the State of California s Department of Housing and Community Development (HCD). Gap Analysis Conduct gap analysis to evaluate formalization or exclusion of in-lieu fees. Currently, the City s in-lieu fees are established on a project-by-project basis, and are based on the difference or gap between what a target household could afford to pay and the median home price for the area. The City s in-lieu fees have provided funding assistance for establishing affordable housing units in the City. A recent example is the Iris Apartments, where in-lieu fees were leveraged with other resources to subsidize the construction of a 20-unit affordable apartment community. Another example is the Boathouses, where the in-lieu fees were provided to a non-profit to acquire the Boathouses and restrict the four onsite apartment units as affordable rentals. Cities may opt not to offer in-lieu fees because the funds obtained may not be adequate to generate housing. Also, there may not be willing builders, and/or acquiring land may not be feasible. Since 1992, the total amount of affordable housing funds collected is approximately 2.3 million and the total amount allocated to new affordable units is approximately 1.3 million. The total number of units built is 26. Upon completion of Phase II, another amendment to the inclusionary regulations could be considered. PROPOSITION A (not applicable): The proposed ordinance would amend the City s Zoning Regulations. Under Proposition A, amendments to these regulations require a public vote if the amendment is a major amendment, but does not require a public vote if the amendment is a regular amendment. A major amendment, in pertinent part, would increase the maximum allowable number of residential units on a parcel or group of parcels. The proposed amendment requires residential developments to reserve a certain percentage of the total units for low income households. The proposed amendments would not increase the maximum allowable number of residential units on a parcel or group of parcels. Therefore, the zoning amendments proposed would be a regular amendment, and do not constitute a major amendment. 1849\03\2336305.1 2018-06-13 Item 10B 5 of 84 4/3/2018 5

ENVIRONMENTAL CONSIDERATIONS: This action is exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3) since there would be no possibility of a significant effect on the environment, in that its provisions requiring the provision of affordable housing would not have any effect on the physical environment. PUBLIC NOTICE AND PARTICIPATION: Local Coastal Program Amendment/Notice of Availability The City s Local Coastal Program (LCP) consists of two parts: 1) Land Use Plan and 2) Implementation Plan. Titles 24 and 30 of the Municipal Code are components of the LCP Implementation Plan; therefore, any amendments to these documents warrant a Local Coastal Program Amendment (LCPA) subject to review and approval by the California Coastal Commission. A LCPA is included as part of the subject request. A Public Notice of Availability opened a six-week public review period from July 24, 2015, through September 4, 2015, and is required to elapse prior to any final action being taken by the City Council on the LCP Amendment. If the City Council approves the LCPA, the proposed LCPA will be submitted to the California Coastal Commission for review and approval. The proposed amendments will not become effective until after formal certification by the California Coastal Commission of the LCPA. Encinitas Municipal Code (EMC) Chapter 23.06 (Citizen s Participation Plan) Applicability The proposed amendment qualifies as a Regular Amendment under Encinitas Municipal Code (EMC) 30.00.040, but does not meet the intent or purpose of a Citizen Participation Plan as specified under the Municipal Code. Pursuant to EMC Section 23.06.020 (Applicability), a Citizen Participation Plan (CPP) is intended for discretionary actions involving development or construction. The purpose of the CPP is to notify residents of a proposed development project near their properties (typically within 500 feet) in order to enhance community awareness, solicit input and feedback on potential issues and concerns, and explain how the development project was modified to address the noted concerns and issues. The proposed amendment, which is citywide, involves changes and modifications that are not associated with, or do not directly impact a private or public development/construction project. GENERAL PLAN CONSISTENCY: The Housing Element of the General Plan addresses the need for affordable housing as follows: GOAL 1 POLICY 1.2 POLICY 1.4 GOAL 2 POLICY 2.3 The City will encourage the provision of a wide range of housing by location, type of unit, and price to meet the existing and future housing needs in the region and city. Strive to provide a wide variety of housing types so that a range of housing needs and tastes will be made available to existing and future residents. Require that housing constructed expressly for low and moderate income households should not be concentrated in any single community or single area of the City and that such housing should be high quality in terms of design and construction without sacrificing affordability. Sound housing will be provided in the City of Encinitas for all persons regardless of age, family status, income level, race, or ethnicity. Encourage developers to provide a balance of housing opportunities. LOCAL COASTAL PROGRAM CONSISTENCY: 1849\03\2336305.1 2018-06-13 Item 10B 6 of 84 4/3/2018 6

The proposed amendments are a part of the City s Local Coastal Program; therefore, certification by the California Coastal Commission is required. The proposed amendment would become effective upon adoption by the Coastal Commission. ATTACHMENTS: 1. City Council Ordinance No. 2018-03, titled An Ordinance of the City Council of the City of Encinitas, California, Adopting Amendments to Title 24 (Subdivisions) and Title 30 (Zoning) of the Encinitas Municipal Code, Which Proposes Changes to the City s Inclusionary Housing Regulations to Better Address the Need for Affordable Units Reserved in New Residential Development Projects. 2. Draft Resolution No. 2018-57 3. General Fund Balance Status Chart 4. Draft Inclusionary Housing Ordinance Revisions in Red Strikeout/Underline 5. March 7, 2018 Inclusionary Housing Workshop Presentations 6. March 7, 2018 Inclusionary Housing Workshop Public Comments/Questions 7. Public Comments 1849\03\2336305.1 2018-06-13 Item 10B 7 of 84 4/3/2018 7

Attachment 1 DRAFT ORDINANCE NO. 2018-03 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF ENCINITAS, CALIFORNIA, ADOPTING AMENDMENTS TO TITLE 24 (SUBDIVISIONS) AND TITLE 30 (ZONING) OF THE ENCINITAS MUNICIPAL CODE, WHICH PROPOSES CHANGES TO THE CITY S INCLUSIONARY HOUSING REGULATIONS TO BETTER ADDRESS THE NEED FOR AFFORDABLE UNITS RESERVED IN NEW RESIDENTIAL DEVELOPMENT PROJECTS CASE NUMBER: 15-162 ZA/LCPA SECTION ONE. The City Council of the City of Encinitas hereby finds and declares as follows: WHEREAS, California Government Code Section 65580(d) states that all cities have a responsibility to use the powers vested in them to facilitate the improvement and development of housing and to make adequate provision for the housing needs of all economic segments of the community; WHEREAS, pursuant to Public Resources Code Section 21065 and CEQA Guidelines Section 15378, the proposed project does not constitute a project within the meaning of CEQA in that it has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and therefore does not require environmental review. The proposed ordinance also is exempt from environmental review pursuant to CEQA Guidelines Section 15061(b)(3) since there would be no possibility of a significant effect on the environment, in that its provisions requiring the provision of affordable housing would not have any effect on the physical environment; WHEREAS, a Public Notice of Availability of proposed Local Coastal Plan Amendments (LCPA) was issued which opened a six-week public review period that ran from July 24, 2015 to September 4, 2015; WHEREAS, the Planning Commission conducted a Public Hearing on August 6, 2015 for the purpose of considering amendments to Titles 24 and 30 of the Encinitas Municipal Code and considered public testimony and made a recommendation to the City Council to adopt the proposed amendments; WHEREAS, the City Council conducted Public Hearings on August 26, 2015, February 14, 2018, and June 13, 2018 for the purpose of considering the proposed amendments to Titles 24 and 30 of the Encinitas Municipal Code; WHEREAS, the City Council and Planning Commission conducted a Special Joint City Council and Planning Commission meeting on March 7, 2018 for the purpose of conducting an Inclusionary Housing Workshop; WHEREAS, the City Council has duly considered all evidence, including testimony and the evaluation and recommendations by staff, presented at said hearings; WHEREAS, notices of said public hearings were made at the time and in the manner required by law; 2018-06-13 Item 10B 8 of 84

Attachment 1 WHEREAS, the City Council finds that this Ordinance is intended to be carried out in a manner in full conformance with the California Coastal Act of 1976 and the Development Services Director is hereby authorized to submit this Ordinance as part of the Local Coastal Program Amendment to the California Coastal Commission for their review and adoption; and WHEREAS, the City Council further finds as follows: A. Rental and owner-occupied housing in the City of Encinitas has become steadily more expensive. In recent years housing costs have escalated sharply, increasing faster than incomes for many groups in the community. As a result, there is a severe shortage of adequate, affordable housing for extremely low, very low, lower, and moderate income households, as evidenced by the following: 1. The 2010-2020 regional housing needs plan for San Diego County, mandated by California Government Code Section 65584 and prepared by the San Diego Association of Governments (SANDAG) shows that 52.5 percent of new housing in San Diego County should be affordable to extremely low, very low, lower, and moderate-income households. 2. According to the most recent 2010-2020 Regional Housing Needs Allocation (RHNA) determined by SANDAG, the City of Encinitas has a total housing need of 2,353 units through the year 2010, out of which nearly 61 percent is for lower- and moderate-income households (1,446 units). Of the affordable units: 587 units (25%) for very low income households; 446 units (19%) for lower income households; and 413 units (17%) for moderate income households. Yet, as described below, these goals fall far short of the actual need for households in these income categories. 3. Because of the shortage of affordable housing in Encinitas, many households overpay for their housing. The 2010-12 American Community Survey found that approximately 48.6 percent of Encinitas households who own their homes pay more than 30 percent of income for their mortgage, while 52.7 percent of renter households pay more than 30 percent of income for housing. These households are overpaying for their housing, according to standards of the United States Department of Housing and Urban Development. Additionally, the 2007-2011 American Community Survey reports that, in Encinitas, nearly 71 percent extremely low income, 81.5 percent very low income, and 76.7 percent lower income households experienced a housing problem, which means a household is either spending more than 30 percent of its household income on housing costs or is living in overcrowded or substandard conditions, or both. Providing decent housing at affordable costs allows households to utilize their resources for other necessary pursuits, such as education, food, investment, and saving for retirement. Providing decent rental housing at affordable costs allows households to save money to purchase a home. B. As stated in the City of Encinitas General Plan, it is the City's policy to encourage the provision of a wide range of housing by location, type of unit and price to meet the existing and future housing needs in the region and City. The City can achieve its goals of providing more affordable housing and achieving an economically balanced community only if part of the new housing built in the City is affordable to households with limited incomes. C. In order to meet the needs of Encinitas households, dwelling units will need to house a variety of household types, incomes, and age groups. This chapter provides incentives for affordable housing to be constructed on the same site as the market rate units in a residential development. 2018-06-13 Item 10B 9 of 84

Attachment 1 D. The affordable housing ordinance codified in this chapter will advance the City's legitimate interest in providing additional housing affordable to all income levels and dispersed throughout the City because affordable units required by the ordinance codified in this chapter, including both rental and ownership units, must be affordable to either very low, lower, and moderate-income households. E. The ordinance codified in this chapter is being adopted pursuant to the City's police power authority to protect the public health, safety, and welfare. Requiring affordable units within each development is consistent with the community's housing element goals of protecting the public welfare by fostering an adequate supply of housing for persons at all economic levels and maintaining both economic diversity and geographically dispersed affordable housing. Requiring builders of new market rate housing to provide some housing affordable to very low, lower, and moderate-income households is also reasonably related to the impacts of their developments, because: 1. Rising land prices have been a key factor in preventing development of new affordable housing. New market-rate housing uses available land and drives up the price of remaining land. New development without affordable units reduces the amount of land development opportunities available for the construction of affordable housing. 2. New residents of market-rate housing place demands on services provided by both public and private sectors, creating a demand for new employees. Some of these public and private sector employees needed to meet the needs of the new residents earn incomes only adequate to pay for affordable housing. Because affordable housing is in short supply in the City, such employees may be forced to live in less than adequate housing within the City, pay a disproportionate share of their incomes to live in adequate housing in the City, or commute ever increasing distances to their jobs from housing located outside the City. These circumstances harm the City's ability to attain employment and housing goals articulated in the City's general plan and place strains on the City's ability to accept and service new market-rate housing development. NOW, THEREFORE, the City Council of the City of Encinitas, California, hereby ordains as follows: SECTION TWO. Chapter 24.21 (Dedication: Affordable Housing Assistance) of the Encinitas Municipal [Subdivision] Code is hereby repealed. SECTION THREE. Chapter 30.41 (Affordable Housing) of the Encinitas Municipal [Zoning] Code is hereby adopted to read as follows: Section 30.41 AFFORDABLE HOUSING Section 30.41.010 Purpose Section 30.41.020 Definitions Section 30.41.030 Applicability Section 30.41.040 Exemptions Section 30.41.050 Affordable Housing Requirement Section 30.41.060 Affordable Housing Standards and Incentives Section 30.41.070 Timing of Construction of Affordable Units Section 30.41.080 Developers Alternative Compliance Options 2018-06-13 Item 10B 10 of 84

Attachment 1 Section 30.41.090 Application and Review Procedures Section 30.41.100 Continued Affordability Section 30.41.110 Affordable Housing Fund Section 30.41.120 Waiver Section 30.41.130 Enforcement Section 30.41.010 Purpose. A. The purpose of this chapter is to enhance the public welfare by establishing policies which require the development of housing affordable to households of very low, low, and moderate incomes, meet the City's regional share of housing needs, and implement the goals and objectives of the general plan and housing element. B. The adoption of a citywide affordable housing program will also assist in alleviating the use of available residential land solely for the benefit of households that are able to afford market rate housing because such market-rate development will be required to contribute to the provision of affordable housing for the entire Encinitas community, and will assist in alleviating the impacts of the service needs of households in new market-rate residential development by making additional affordable housing available. C. The City Council also desires to provide and maintain affordable housing opportunities in the community through an affordable housing program for both ownership and rental housing, and, in furtherance of that goal, includes rental affordable housing requirements in this chapter consistent with Government Code Sections 65850(g) and 65850.01. D. The City Council also desires to provide the residential development community with alternatives to construction of the affordable units on the same site as the market rate residential development. Therefore, this chapter includes a menu of options from which a developer may select an alternative to the construction of affordable units on the same site as the market rate residential development. Section 30.41.020 Definitions. The definitions set forth in this section shall govern the application and interpretation of this chapter. Words and phrases not defined in this section shall be interpreted so as to give this chapter its most reasonable application. A. "Affordable housing fund" means a fund or account designated by the City to maintain and account for all monies received pursuant to this chapter. B. "Affordable housing agreement" means an agreement in conformance with Section 30.41.090.B of this chapter between the City and an applicant, governing how the applicant shall comply with this chapter. C. "Affordable housing guidelines" means any requirements for implementation and administration of this chapter adopted by the City Council in accordance with Section 30.41.090.D of this chapter. D. "Affordable housing plan" means a plan containing all of the information specified in and submitted in conformance with Section 30.41.090.A of this chapter, specifying the manner in which affordable units will be provided in conformance with this chapter and any adopted affordable housing guidelines. 2018-06-13 Item 10B 11 of 84

Attachment 1 E. Affordable rent means the maximum monthly rent, including an allowance for tenant paid utilities calculated at the specified income level in accordance with California Health and Safety Code Section 50053. F. Affordable sales price means the maximum purchase price that will be affordable to the specified household at the specified income level, calculated in accordance with California Health and Safety Code Section 50052.5. The affordable sales price shall include a reasonable down payment, and monthly housing payments (including interest, principal, mortgage insurance, property taxes, homeowner s insurance, homeowner s association dues, and a reasonable allowance for property maintenance, repairs, and utilities), all as determined by the City. G. Affordable unit means a dwelling unit required by this chapter to be affordable to low-income households. H. "Applicant" or "developer" means a person, persons, or entity that applies for a residential development and also includes the owner or owners of the property if the applicant does not own the property on which development is proposed. I. "Approval body" means the body with the authority to approve the proposed residential development. J. "Area median income" or "AMI" means the annual median income for San Diego County, adjusted for household size, as published periodically in the California Code of Regulations, Title 25, Section 6932, or its successor provision, or as established by the City of Encinitas in the event that such median income figures are no longer published periodically in the California Code of Regulations. K. Building permit includes full structural building permits as well as partial permits such as foundation-only permits. L. "Common ownership or control" refers to property owned or controlled by the same person, persons, or entity, or by separate entities in which any shareholder, partner, member, or family member of an investor of the entity owns ten percent (10%) or more of the interest in the property. M. "Construction phase" means either: 1. The area included within one approved tentative subdivision map for residential development where a single final map implements the entire approved tentative map; 2. The area included within each separate final map for residential development where multiple final maps implement the entire approved tentative map; or 3. An area designated as a construction phase in an approved affordable housing plan. N. "Contiguous property" means any parcel of land that is: 1. Touching another parcel at any point; 2. Separated from another parcel at any point only by a public right of way, private street or way, or public or private utility, service, or access easement; or 3. Separated from another parcel only by other real property of the applicant which is not subject to the requirements of this chapter at the time of the planning permit application by the applicant. 2018-06-13 Item 10B 12 of 84

Attachment 1 O. Density bonus units means dwelling units approved in a residential development pursuant to California Government Code Section 65915 and Encinitas Municipal Code Section 30.16.020.C that are in excess of the maximum allowable residential density otherwise permitted by the City of Encinitas. P. "First approval" means the first of the following approvals to occur with respect to a residential development after the effective date of this chapter: planning permit or building permit. Q. Low income households are those households whose income does not exceed the low-income limits applicable to San Diego County as defined in California Health and Safety Code Section 50079.5 and published annually pursuant to Title 25 of the California Code of Regulations, Section 6932 (or its successor provision) by the California Department of Housing and Community Development. R. "Market rate unit" means a new dwelling unit in a residential development that is not an affordable unit. S. Ownership residential development means any residential development that includes the creation of one or more additional dwelling units that may be sold individually. A residential ownership development also includes the conversion of a residential rental development to a residential ownership development. T. "Planning area" means one of the five Encinitas communities (Cardiff, New Encinitas, Leucadia, Old Encinitas, and Olivenhain). U. Planning permit means any discretionary approval of a residential development, including but not limited to a general or specific plan adoption or amendment, rezoning, tentative map, parcel map, conditional use permit, variances, design review, or coastal development permit. V. Rental residential development means any residential development that creates one or more additional dwelling units that cannot be lawfully sold individually in conformance with the Subdivision Map Act. W. Residential development means any development for which a planning permit or building permit is required that includes the creation of one or more additional dwelling units, conversion of nonresidential uses to dwelling units, or the conversion of a use from a residential rental development to a residential ownership development. X. "Surplus affordable unit" means any affordable unit constructed in connection with residential development and without any public subsidy, which exceeds the numerical requirement for affordable units for that residential development under this chapter. Section 30.41.030 Applicability. The provisions of this chapter shall apply to: A. All residential development except for any residential development exempt under Section 30.41.040; and B. All residential development and contiguous properties that are under common ownership or control, 2018-06-13 Item 10B 13 of 84

Attachment 1 Section 30.41.040 Exemptions. A. The following residential developments shall be exempt from the provisions of this chapter: 1. Residential developments with fewer than seven dwelling units or lots. 2. Residential developments which are developed in accordance with the terms of a development agreement adopted by ordinance pursuant to the authority and provisions of California Government Code Section 65864 et seq., and that is executed prior to the effective date of the ordinance codified in this chapter, provided that such residential developments shall comply with any affordable housing requirements included in the development agreement or any predecessor ordinance in effect on the date the development agreement was executed. 3. Residential developments exempted by California Government Code Section 66474.2 or 66498.1, provided that such residential developments shall comply with any predecessor ordinance, resolution, or policy in effect on the date the application for the development was deemed substantially complete. 4. Residential developments for which an application for a planning permit has been deemed complete no later than the effective date of this chapter, provided that such residential developments shall comply with any predecessor ordinance, resolution, or policy in effect on the date the application for the development was deemed complete. B. Planning permit expiration. Upon the expiration of any planning permit, and unless otherwise exempted, the residential development shall be subject to the affordable housing requirements of this chapter, and shall not proceed until such time as an affordable housing plan is approved in conjunction with any other required planning permit or amendment thereto. The provisions of this chapter shall also apply to any residential development which is granted a discretionary extension of a planning permit beyond its initial term, to the extent consistent with state law. Section 30.41.050 Affordable Housing Requirement. All new residential developments, unless exempt under Section 30.41.040, and contiguous property under common ownership and control shall include affordable units. Calculations of the number of affordable units required by this section shall be based on the number of dwelling units in the residential development, excluding any density bonus units. A. On-site affordable requirement. Unless exempted from this chapter, or unless an alternative is approved as described in 30.41.080, residential developments shall include affordable units upon the same site as the residential development as follows: 1. Ownership residential development: the applicant shall provide fifteen percent (15%) of the dwelling units in the residential development made available at affordable sales price to lowincome households. 2. Rental residential development: the applicant shall provide fifteen percent (15%) of the dwelling units in the residential development made available at affordable rent to low-income households. B. If the affordable housing requirements described in subsection A above result in a fractional unit, the applicant may either pay an in-lieu fee as specified in Section 30.41.080.E or may construct one additional affordable unit, at the applicant's option. 2018-06-13 Item 10B 14 of 84

Attachment 1 C. When a residential development includes both ownership and rental dwelling units, the provisions of this chapter that apply to ownership residential development shall apply to that portion of the development that consists of ownership dwelling units, while the provisions of this chapter that apply to rental residential development shall apply to that portion of the development that consists of rental dwelling units. D. An applicant for a planning permit shall not avoid the requirements of this chapter by submitting piecemeal planning permit applications. At the time of the application for first approval for the residential development, the applicant shall identify all contiguous property under common ownership and control. The applicant shall not be required to construct dwelling units upon the contiguous property at the time of the application for first approval; however, the applicant shall be required to include the contiguous property under common ownership or control in its affordable housing plan. The affordable housing agreement shall be recorded against the residential development and all contiguous property under common ownership or control and shall require compliance with this chapter upon development of each contiguous property at such time as there are planning permit applications that would authorize a total of seven or more residential units for the residential development and the contiguous property under common ownership or control. Section 30.41.060 Affordable Housing Standards and Incentives. A. Affordable units shall be comparable in exterior appearance and overall quality of construction to market-rate units in the same housing development. Interior finishes and amenities may differ from those provided in the market rate units, but neither the workmanship nor the products may be of substandard or inferior quality as determined by the City. B. The affordable units shall have the same amenities as the market rate units, including the same access to and enjoyment of common open space, parking, storage, and other facilities in the residential development. C. The developer of a residential development providing all required affordable units upon the same site as the market-rate units may, at the developer's sole option and concurrently with the submittal of the affordable housing plan, submit a written request for one or more of the following on-site affordable housing development incentives: 1. Density bonus and other regulatory incentives pursuant to Government Code Section 65915 and the provisions of Section 30.16.020.C, if the residential development contains sufficient affordable units to qualify for a density bonus. If the applicant requests a density bonus, the other incentives listed in this subsection D may be provided only if each is individually requested as a regulatory incentive under Section 30.16.020.C. 2. City assistance. The developer may request City staff to assist in the sale or rental of the affordable units to qualified households at an affordable housing cost. 3. Financial subsidies. The developer may apply for financial subsidies for the affordable units from any available federal and state funding sources. The developer may also apply for financial subsidy from City-administered funds for the difference in costs that results if the developer provides more affordable units or provides affordable units to households in income classifications that are lower than required. D. Affordable housing plan. The incentives requested by the developer shall be included in the proposed affordable housing plan submitted at the time of application for the first approval, and any incentives authorized by the City shall be included in the affordable housing plan, if approved by the City, for the residential development. 2018-06-13 Item 10B 15 of 84

Attachment 1 Section 30.41.070 Timing of Construction of Affordable Units. All required affordable units shall be made available for occupancy concurrently with the market rate units. For the purposes of this subsection, "concurrently" means one of the following: A. The City may not issue building permits for more than fifty percent (50%) of the market rate units until it has issued building permits for all of the affordable units, and the City may not approve any final inspections or certificates of occupancy for more than seventy five percent (75%) of the market rate units until it has issued final inspections or certificates of occupancy for all of the affordable units. B. In-lieu fees, as appropriate, have been paid in accordance with Section 30.41.080.E.1. C. The applicant has met, or made arrangements satisfactory to the City to meet, an alternative requirement as permitted by Section 30.41.080. Section 30.41.080 Developers Alternative Compliance Options. A. Accessory dwelling units. As an alternative to providing single-family dwelling units as affordable units, an applicant may instead provide an affordable accessory dwelling unit for each required affordable unit, subject to the standards for accessory dwelling units contained in Section 30.48.040T. The term and affordability of the accessory dwelling units and the affordable housing agreement and rent regulatory agreement shall conform with the provisions of this Chapter 30.41 applicable to rental affordable units. In no event shall a developer be allowed to construct more than a total of ten (10) accessory dwelling units in any given residential development to satisfy the requirements of this Chapter. B. Rental units in an ownership residential development. The affordable housing requirement in Section 30.41.050.A.1 may be satisfied by providing fifteen percent (15%) of the dwelling units in the residential development at affordable rent to low income households. Any rent regulatory agreement shall include provisions to allow for the sale of the affordable units and relocation benefits for tenants of the affordable units if the owner of the ownership residential development later determines to offer any affordable units in the residential development for sale. At sale, appropriate documents shall be recorded to ensure affordability in perpetuity of the affordable units to low income households. C. Off-site construction of affordable units. The applicant may propose to construct the affordable units required by Section 30.41.050.A on another site. The City may grant a credit for the off-site construction if the City Council makes all of the following findings, at the City's sole discretion: 1. The developer has demonstrated that the goals of this Chapter and the City s Housing Element would be better served by allowing some or all of the affordable units required by Section 30.41.050.A to be produced and operated at an alternative site or sites. 2. The off-site construction project represents a more effective and feasible means of implementing this Chapter and the goals of the City s Housing Element. Factors to be weighed in this determination include: the feasibility of the on-site option considering project size, site constraints, competition from other projects, difficulty in integrating due to significant price and product type disparity, lack of capacity of the on-site developer to produce or operate affordable housing. Also to be considered are whether the off-site option offers greater feasibility and cost effectiveness, particularly regarding potential local public assistance and any adopted affordable 2018-06-13 Item 10B 16 of 84

Attachment 1 housing guidelines, location advantages such as proximity to jobs, schools, transportation, and services, diminished impact on other existing developments, capacity of the proposed affordable housing developer to deliver and operate the project, and satisfaction of multiple developer obligations that would be difficult to satisfy on multiple projects. 3. Financing or a viable financing plan, which may include public funding, shall be in place for the off-site affordable units. 4. The off-site location must be suitable for the proposed affordable housing, consistent with any adopted affordable housing guidelines and the Housing Element, will not tend to cause residential segregation, and be located within the same planning (community) area with appropriate infrastructure and services. Any off-site alternative must comply with the density, intensity and development standards that are permitted under the zone for the site. 5. All agreements between parties regarding off-site construction of affordable housing shall be made a part of the affordable housing agreement required for the site(s) and shall be subject to review and approval by the City Manager. D. Preservation or conversion of existing units. The affordable housing requirement in Section 30.41.050 may be satisfied by the preservation of existing affordable units at risk of loss or by conversion of market-rate units to affordable units, if the preservation or conversion of these units is consistent with Government Code Section 65583.1 and allows the City to substitute the preservation or conversion of these units for the obligation to identify adequate sites. E. In-lieu fees. The affordable housing requirement in Section 30.41.050 may be satisfied by the payment of a fee to the City in-lieu of constructing the affordable units within the residential development. In-lieu fees may be established from time-to-time by resolution of the City Council or may be determined for a specific residential development through the preparation of an affordability gap analysis that will determine the difference between the affordable sales price or rent and the fair market rate price for the unit. 1. No certificate of occupancy shall be issued by the City for any market rate unit in the residential development until all in-lieu fees for the residential development have been paid to the City. 2. Prior to recordation of any final or parcel map for the development, notice of this requirement shall be recorded against each lot in the subdivision. The developer shall provide specific written notice to any purchaser of any dwelling unit prior to the acceptance of any offer to purchase, and shall obtain executed acknowledgment of the receipt of such notice, that purchaser shall not have any right to occupy the dwelling unit until such time as all in-lieu fees owing for the residential development are paid to the City. 3. All in-lieu fees shall be deposited in the affordable housing fund described in Section 30.41.110. F. Dedication of land. The applicant may propose to meet the requirements of Section 30.41.050.A by dedicating property to the City in lieu of constructing affordable units within the residential development. The City may approve property dedication under this subsection only if the proposal meets all of the following conditions: 1. The number of affordable units to be constructed on the dedicated property shall be the number of affordable units required under 30.41.050.A, or the affordable units to be constructed on the dedicated property shall provide units affordable to households in a lesser income category than required under 30.41.050.A (for example, very low income units exclusively); and 2018-06-13 Item 10B 17 of 84

Attachment 1 2. Financing or a viable financing plan, which may include public funding, shall be in place for construction of the affordable units on the dedicated property; and 3. The off-site location is suitable for he proposed affordable housing, consistent with the affordable housing guidelines and the Housing Element, and will not tend to cause residential segregation and is located within the same planning area with appropriate infrastructure and services. The property shall be dedicated to the City prior to issuance of any building permit for the residential development. G. Affordable housing credits. The applicant may propose to meet the requirements of Section 30.41.050.A by obtaining credits for affordable units from a developer of surplus affordable units. The City may approve the use of credits under this subsection only if the proposal meets all of the following conditions: 1. A developer who constructs a surplus affordable unit may utilize that surplus affordable unit to satisfy the affordable housing requirement for future residential development for a period of no more than ten (10) years after issuance of the certificate of occupancy for the surplus affordable unit. 2. A developer who constructs a surplus affordable unit may sell or otherwise transfer the surplus affordable credit to another developer in order to satisfy, or partially satisfy, the transferee developer's affordable housing requirement. 3. The transferee developer who utilizes any surplus affordable housing credit shall comply with the timing requirements for affordable units to be made available for occupancy concurrently with the market rate units in the residential development as required by Section 30.41.070. 4. No residential development that has received federal, state, or local financial assistance shall be deemed to have surplus affordable units. H. Other alternative compliance methods. A developer may propose an alternative compliance method to provide affordable units through other means. The decision-making body may approve or conditionally approve such an alternative only if the decision-making body determines, based on substantial evidence, that such alternative compliance will provide as many or more affordable units at the same or lower income levels and will otherwise provide greater public benefit than would provision of the affordable units on site. Section 30.41.090 Application and Review Procedures. A. Affordable housing plan. 1. An application for the first approval of a residential development shall include an affordable housing plan describing how the development will comply with the provisions of this chapter. As an alternative to compliance with the basic provisions included in Section 30.41.050, an applicant may propose one of the alternatives listed in Section 30.41.080 as part of the affordable housing plan. If in-lieu fees are requested, the applicant shall submit an affordability gap analysis. 2. Any adopted affordable housing guidelines may specify the contents of the affordable housing plan. No application for a first approval for a residential development may be deemed complete unless an affordable housing plan is submitted in conformance with this chapter. The cost of 2018-06-13 Item 10B 18 of 84

Attachment 1 reviewing any affordability gap analysis or other proposed alternative, including but not limited to the cost to the City of hiring a consultant to review the application, shall be borne by the applicant. 3. The affordable housing plan shall be processed concurrently with all other permits required for the residential development. Before approving the affordable housing plan, the approval body shall find that the affordable housing plan conforms to this chapter. A condition shall be attached to the first approval of any residential development to require recordation of the affordable housing agreement described in Section 30.41.090.B prior to the approval of any final or parcel map or building permit for the residential development. 4. The approved affordable housing plan for a residential development, or for a building phase in a residential development, where phasing has been approved as part of planning permit approvals, may be amended prior to issuance of any building permit for the residential development or building phase, if applicable. A request for a minor modification of an approved affordable housing plan may be granted by the Development Services Director if the modification is substantially in compliance with the original affordable housing plan and conditions of approval. Other modifications to the affordable housing plan shall be processed in the same manner as the original plan. B. Affordable housing agreement. 1. The applicant shall enter into an affordable housing agreement with the City, in a form approved by the City Attorney, to be executed by the City Manager, to ensure that all the requirements of this Chapter are satisfied. The affordable housing agreement shall be recorded against the residential development prior to approval of any final or parcel map, or issuance of any building permit, whichever occurs first. 2. The affordable housing agreement shall specify the number, type, location, size, and phasing of all affordable units, provisions for income certification and screening of potential purchasers or renters of units, and resale control mechanisms, including the financing of ongoing administrative and monitoring costs, consistent with the approved affordable housing plan and any adopted affordable housing guidelines, as determined by the city manager or designee. C. The City Council, by resolution, may establish fees for the ongoing administration and monitoring of the affordable units, which fees may be updated periodically, as required. D. The City Council, by resolution, may adopt affordable housing guidelines to implement this chapter. Section 30.41.100 Continued Affordability. A. Any adopted affordable housing guidelines may include standard documents for execution by the City Manager, in a form approved by the City Attorney, to ensure the continued affordability of the affordable units approved for each residential development. The documents shall be recorded against the residential development, all affordable units, and any site subject to the provisions of this chapter. B. All affordable units shall remain affordable to the targeted income group for a minimum of 55 years. The affordable housing agreement shall guarantee the affordability of the affordable units to the targeted income group for a minimum of 55 years or a longer period of time if required by the construction or mortgage financing assistance program, mortgage insurance program, or rental subsidy program. 2018-06-13 Item 10B 19 of 84

Attachment 1 C. Any eligible household that occupies an affordable unit must occupy that unit as its principal residence, unless otherwise approved in writing for rental to a third party eligible household for a limited period of time due to household hardship, as may be specified in any adopted affordable housing guidelines. D. No household may begin occupancy of an affordable unit until the household has been determined to be eligible to occupy that unit by the Development Services Director or designee. Any adopted affordable housing guidelines may establish standards for determining household income, affordable housing cost, provisions for continued monitoring of tenant eligibility, and other eligibility criteria. E. Officials, employees, or consultants of the City and members of city boards and commissions shall comply with all applicable laws, regulations, and policies relating to conflicts of interest as to their eligibility to develop, construct, sell, rent, lease, occupy, or purchase an affordable unit. Any adopted affordable housing guidelines shall include conflict of interest provisions relating to the administration of this chapter and the eligibility of persons to occupy affordable units. Section 30.41.110 Affordable Housing Fund. A. All in-lieu fees, promissory note repayments, or other funds collected under this chapter shall be deposited into the City s Affordable Housing Fund. B. The moneys in the Affordable Housing Fund and all earnings from investment of the moneys in the Fund shall be expended exclusively to provide housing affordable to extremely low-income, very low-income, lower-income, moderate-income households and any special needs populations in the City, consistent with the goals and policies contained in the City s Housing Element, and for administration and compliance monitoring of the affordable housing program, as approved by the City Council. Section 30.41.120 Waiver. A. Notwithstanding any other provision of this chapter, the requirements of this chapter may be waived, adjusted, or reduced based upon a showing that applying the requirements of this chapter would result in an unconstitutional taking of property or would result in any other unconstitutional result. B. Any request for a waiver, adjustment, or reduction under this section shall be submitted to the City concurrently with the affordable housing plan. The request for a waiver, adjustment, or reduction shall set forth in detail the factual and legal basis for the claim. C. The request for a waiver, adjustment, or reduction shall be reviewed and considered in the same manner and at the same time as the affordable housing plan. D. In making a determination on an application for waiver, adjustment, or reduction, the applicant shall bear the burden of presenting substantial evidence to support the claim. The City may assume each of the following when applicable: 1. That the applicant will provide the most economical affordable units feasible, meeting the requirements of this chapter and any adopted affordable housing guidelines; and 2. That the applicant will benefit from the incentives for the residential development as described in this chapter and elsewhere in the municipal code. 2018-06-13 Item 10B 20 of 84

Attachment 1 E. The waiver, adjustment or reduction may be approved only to the extent necessary to avoid an unconstitutional result, after adoption of written findings, based on substantial evidence, supporting the determinations required by this section. If a reduction, adjustment, or waiver is granted, any change in the residential development shall invalidate the reduction, adjustment, or waiver, and a new application shall be required for a reduction, adjustment, or waiver pursuant to this section. Section 30.41.130 Enforcement. A. The City Attorney shall be authorized to enforce the provisions of this chapter and all affordable housing agreements, regulatory agreements, and all other covenants or restrictions placed on affordable units, by civil action and any other proceeding or method permitted by law. B. Failure of any official or agency to fulfill the requirements of this chapter shall not excuse any applicant or owner from the requirements of this chapter. No permit, license, map, or other approval or entitlement for a residential development shall be issued, including without limitation a final inspection or certificate of occupancy, until all applicable requirements of this chapter have been satisfied. C. The remedies provided for herein shall be cumulative and not exclusive and shall not preclude the City from any other remedy or relief to which it otherwise would be entitled under law or equity. SECTION FOUR: Severability. If any section, subsection, sentence, clause, phrase or word of this Ordinance is for any reason held to be invalid by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed and adopted this Ordinance, and each and all provisions hereof, irrespective of the fact that one or more provisions may be declared invalid. SECTION FIVE: Public Notice and Effective Date. The City Clerk is directed to prepare and have published a summary of the ordinance no less than five days prior to consideration of its adoption, and again within 15 days following adoption, indicating the votes cast. This Ordinance will become effective following certification by the California Coastal Commission as being consistent with the Local Coastal Program for the City of Encinitas and California Coastal Act. SECTION SIX: This Ordinance was introduced on June 13, 2018 and adopted on 2018. PASSED AND ADOPTED this day of, 2018 by the following vote to wit: AYES: NAYS: ABSTAIN: ABSENT: Catherine S. Blakespear, Mayor, City of Encinitas 2018-06-13 Item 10B 21 of 84

Attachment 1 ATTESTATION AND CERTIFICATION: I hereby certify that this is a true and correct copy of Ordinance No. 2018-03 which has been published pursuant to law. Kathy Hollywood, City Clerk 2018-06-13 Item 10B 22 of 84

Attachment 2 RESOLUTION NO. 2018-57 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ENCINITAS AMENDING THE FISCAL YEAR 2017-18 BUDGET WHEREAS, on June 28, 2017 the City of Encinitas City Council adopted Resolution No. 2017-51 appropriating the budget for Fiscal Year 2017-18; and WHEREAS, changes in anticipated revenues and/or expenditures of the City of Encinitas necessitates a revision of the appropriations for Fiscal Year 2017-18; and WHEREAS, budgeted expenditures do not exceed anticipated revenue and available fund balance; and WHEREAS, the City Council has reviewed the proposed Fiscal Year 2017-18 budget amendments; and NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED that the City Council of the City of Encinitas does, hereby, adopt the amendments for Fiscal Year 2017-18 as shown in Exhibit A to this resolution. PASSED AND ADOPTED this 13 th day of June, 2018 by the following vote, to wit: AYES: NAYS: ABSENT: ABSTAIN: Catherine S. Blakespear, Mayor City of Encinitas ATTEST: Kathy Hollywood, City Clerk 2018-06-13 Item 10B 23 of 84

Exhibit A to Resolution 2018-57 Fund Name Organization Code Object Code 1. General 10190999 498.2 2. Capital Improvement 40100000 398.2 Project No. 3. Capital Improvement 40195101 592 WC15E Description Revenue/ Transfer In Increase (Decrease) Expenditure/ Transfer Out Increase (Decrease) Transfer Out to the Capital Imp Fund $ 23,500 Transfer In from the General Fund $ 23,500 Update Inclusionary Ordinance $ 23,500 Total $ 23,500 $ 47,000 2018-06-13 Item 10B 24 of 84

City of Encinitas Summary of Budgetary Fund Balance FY 2017-2018 ATTACHMENT 3 Description FY 2017-18 Council Action (Corrected) Meeting Date Resolution # Increase (Decrease) to Fund Balance Available Fund Balance General Fund (101) Beginning Fund Balance, 7/1/17 25,651,592 Less: Contingency Reserve (12,520,353) Budget Stabilization Reserve (1,417,046) Non-spendable Reserve (727,094) CIP Carryover Reserve Available Beginning Fund Balance, 7/1/17 10,987,099 FY 2017-18 Original Budgets Adopted 6/28/17 2017-51 (1,189,960) 9,797,139 FY 2017-18 Budget Adjustments by Council: 1. Design review of mobility projects 8/9/17 2017-62 (50,000) 9,747,139 2. Harbaugh Seaside Parkway maintenance costs 8/23/17 2017-68 (29,535) 9,717,604 3. Encumbrance Carry Forward for professional services contract 8/25/17 Jnl 105203 (7,000) 9,710,604 4. SANDAG Coastal Rail Trail invoice 8/30/17 2017-81 (218,579) 9,492,025 5. Sheriff's Department 960 hour rehire program for Code Enforcement 8/30/17 2017-84 (57,600) 9,434,425 6. Districting Election professional services 8/30/17 2017-86 (150,000) 9,284,425 7. Lump sum payment to CalPERS to reduce unfunded pension liability 11/29/17 2017-95 (500,000) 8,784,425 8. Fund balance transfer to Open Space Acquisition Fund (Fund 235) 11/29/17 2017-95 (500,000) 8,284,425 9. Preparation of joint technical feasibility study on Community Choice Energy 11/29/17 2017-106 (16,731) 8,267,694 10. As Needed Grant Writing Services Contract 11/29/17 2017-107 (20,000) 8,247,694 11. FY 2017-18 First Quarter adjustments 12/20/17 2017-113 (160,885) 8,086,809 12. FY 2017-18 First Quarter CIP transfer adjustments 12/20/17 2017-113 88,869 8,175,678 13. Interim improvements on Coast Highway 101 12/20/17 2017-109 (150,000) 8,025,678 14. Legal retainer and additional services 12/20/17 2017-116 (32,950) 7,992,728 15. Security and fire system contract adjustments 12/20/17 2017-110 (16,474) 7,976,254 16. Private inspection services 12/20/17 2017-112 (399,598) 7,576,656 17. Additional Funding to the Housing Plan project budget 1/10/18 2018-06 (546,027) 7,030,629 18. Implementation of the CMLS/RCVS 2/14/18 2018-19 (60,000) 6,970,629 19. Abandoned Vessel South of Beacon Beach 3/14/18 2018-29 (14,500) 6,956,129 20. Mobile Data Computer (MDC) Replacement - No effect to the GF 3/14/18 2018-25 - 6,956,129 21. FY 2017-18 Mid-Year budget amendments 3/28/18 2018-32 95,596 7,051,725 22. FY 2017-18 Mid-Year CIP transfer amendments 3/28/18 2018-32 (808,931) 6,242,794 23. Montgomery Avenue Sidewalk Improvements Project (CS17C) 5/9/18 (36,675) 6,206,119 24. Cardiff Living Shoreline Project Additional Grant Funds - No effect to the GF 5/23/18-6,206,119 25. Verdi Pedestrian Rail Undercrossing Project (CS16E) - pending 5/23/18 (55,000) 6,151,119 26. - 6,151,119 27. - 6,151,119 28. - 6,151,119 29. - 6,151,119 30. - 6,151,119 31. - 6,151,119 32. - 6,151,119 Projected Available Fund Balance 6/30/2018 (4,835,980) 6,151,119 2018-06-13 Item 10B 25 of 84

Attachment 4 DRAFT ORDINANCE NO. 2018-03 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF ENCINITAS, CALIFORNIA, ADOPTING AMENDMENTS TO TITLE 24 (SUBDIVISIONS) AND TITLE 30 (ZONING) OF THE ENCINITAS MUNICIPAL CODE, WHICH PROPOSES CHANGES TO THE CITY S INCLUSIONARY HOUSING REGULATIONS TO BETTER ADDRESS THE NEED FOR AFFORDABLE UNITS RESERVED IN NEW RESIDENTIAL DEVELOPMENT PROJECTS CASE NUMBER: 15-162 ZA/LCPA SECTION ONE. The City Council of the City of Encinitas hereby finds and declares as follows: WHEREAS, California Government Code Section 65580(d) states that all cities have a responsibility to use the powers vested in them to facilitate the improvement and development of housing and to make adequate provision for the housing needs of all economic segments of the community; WHEREAS, pursuant to Public Resources Code Section 21065 and CEQA Guidelines Section 15378, the proposed project does not constitute a project within the meaning of CEQA in that it has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and therefore does not require environmental review. The proposed ordinance also is exempt from environmental review pursuant to CEQA Guidelines Section 15061(b)(3) since there would be no possibility of a significant effect on the environment, in that its provisions requiring the provision of affordable housing would not have any effect on the physical environment; WHEREAS, a Public Notice of Availability of proposed Local Coastal Plan Amendments (LCPA) was issued which opened a six-week public review period that ran from July 24, 2015 to September 4, 2015; WHEREAS, the Planning Commission conducted a Public Hearing on August 6, 2015 for the purpose of considering amendments to Titles 24 and 30 of the Encinitas Municipal Code and considered public testimony and made a recommendation to the City Council to adopt the proposed amendments; WHEREAS, the City Council conducted Public Hearings on August 26, 2015 and, February 14, 2018, and June 13, 2018 for the purpose of considering the proposed amendments to Titles 24 and 30 of the Encinitas Municipal Code; WHEREAS, the City Council and Planning Commission conducted a Special Joint City Council and Planning Commission meeting on March 7, 2018 for the purpose of conducting an Inclusionary Housing Workshop; WHEREAS, the City Council has duly considered all evidence, including testimony and the evaluation and recommendations by staff, presented at said hearings; WHEREAS, notices of said public hearings were made at the time and in the manner required by law; 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 26 of 84

1849\05\2295814.1 2/8/2018 Attachment 4 WHEREAS, the City Council finds that this Ordinance is intended to be carried out in a manner in full conformance with the California Coastal Act of 1976 and the Development Services Director is hereby authorized to submit this Ordinance as part of the Local Coastal Program Amendment to the California Coastal Commission for their review and adoption; and WHEREAS, the City Council further finds as follows: A. Rental and owner-occupied housing in the City of Encinitas has become steadily more expensive. In recent years housing costs have escalated sharply, increasing faster than incomes for many groups in the community. As a result, there is a severe shortage of adequate, affordable housing for extremely low, very low, lower, and moderate income households, as evidenced by the following: 1. The 2010-2020 regional housing needs plan for San Diego County, mandated by California Government Code Section 65584 and prepared by the San Diego Association of Governments (SANDAG) shows that 52.5 percent of new housing in San Diego County should be affordable to extremely low, very low, lower, and moderate-income households. 2. According to the most recent 2010-2020 Regional Housing Needs Allocation (RHNA) determined by SANDAG, the City of Encinitas has a total housing need of 2,353 units through the year 2010, out of which nearly 61 percent is for lower- and moderate-income households (1,446 units). Of the affordable units: 587 units (25%) for very low income households; 446 units (19%) for lower income households; and 413 units (17%) for moderate income households. Yet, as described below, these goals fall far short of the actual need for households in these income categories. 3. Because of the shortage of affordable housing in Encinitas, many households overpay for their housing. The 2010-12 American Community Survey found that approximately 48.6 percent of Encinitas households who own their homes pay more than 30 percent of income for their mortgage, while 52.7 percent of renter households pay more than 30 percent of income for housing. These households are overpaying for their housing, according to standards of the United States Department of Housing and Urban Development. Additionally, the 2007-2011 American Community Survey reports that, in Encinitas, nearly 71 percent extremely low income, 81.5 percent very low income, and 76.7 percent lower income households experienced a housing problem, which means a household is either spending more than 30 percent of its household income on housing costs or is living in overcrowded or substandard conditions, or both. Providing decent housing at affordable costs allows households to utilize their resources for other necessary pursuits, such as education, food, investment, and saving for retirement. Providing decent rental housing at affordable costs allows households to save money to purchase a home. B. As stated in the City of Encinitas General Plan, it is the City's policy to encourage the provision of a wide range of housing by location, type of unit and price to meet the existing and future housing needs in the region and City. The City can achieve its goals of providing more affordable housing and achieving an economically balanced community only if part of the new housing built in the City is affordable to households with limited incomes. C. In order to meet the needs of Encinitas households, dwelling units will need to house a variety of household types, incomes, and age groups. This chapter provides incentives for affordable housing to be constructed on the same site as the market rate units in a residential development. 2018-06-13 Item 10B 27 of 84

Attachment 4 1849\05\2295814.1 2/8/2018 D. The affordable housing ordinance codified in this chapter will advance the City's legitimate interest in providing additional housing affordable to all income levels and dispersed throughout the City because affordable units required by the ordinance codified in this chapter, including both rental and ownership units, must be affordable to either very low, lower, and moderate-income households. E. The ordinance codified in this chapter is being adopted pursuant to the City's police power authority to protect the public health, safety, and welfare. Requiring affordable units within each development is consistent with the community's housing element goals of protecting the public welfare by fostering an adequate supply of housing for persons at all economic levels and maintaining both economic diversity and geographically dispersed affordable housing. Requiring builders of new market rate housing to provide some housing affordable to very low, lower, and moderate-income households is also reasonably related to the impacts of their developments, because: 1. Rising land prices have been a key factor in preventing development of new affordable housing. New market-rate housing uses available land and drives up the price of remaining land. New development without affordable units reduces the amount of land development opportunities available for the construction of affordable housing. 2. New residents of market-rate housing place demands on services provided by both public and private sectors, creating a demand for new employees. Some of these public and private sector employees needed to meet the needs of the new residents earn incomes only adequate to pay for affordable housing. Because affordable housing is in short supply in the City, such employees may be forced to live in less than adequate housing within the City, pay a disproportionate share of their incomes to live in adequate housing in the City, or commute ever increasing distances to their jobs from housing located outside the City. These circumstances harm the City's ability to attain employment and housing goals articulated in the City's general plan and place strains on the City's ability to accept and service new market-rate housing development. NOW, THEREFORE, the City Council of the City of Encinitas, California, hereby ordains as follows: SECTION TWO. Chapter 24.21 (Dedication: Affordable Housing Assistance) of the Encinitas Municipal [Subdivision] Code is hereby repealed. SECTION THREE. Chapter 30.41 (Affordable Housing) of the Encinitas Municipal [Zoning] Code is hereby adopted to read as follows: Section 30.41 AFFORDABLE HOUSING Section 30.41.010 Purpose Section 30.41.020 Definitions Section 30.41.030 Applicability Section 30.41.040 Exemptions Section 30.41.050 Affordable Housing Requirement Section 30.41.060 Affordable Housing Standards and Incentives Section 30.41.070 Timing of Construction of Affordable Units Section 30.41.080 Developers Alternative Compliance Options 2018-06-13 Item 10B 28 of 84

Attachment 4 Section 30.41.090 Application and Review Procedures Section 30.41.100 Continued Affordability Section 30.41.110 Affordable Housing Fund Section 30.41.120 Waiver Section 30.41.130 Enforcement Section 30.41.010 Purpose. A. The purpose of this chapter is to enhance the public welfare by establishing policies which require the development of housing affordable to households of very low, low, and moderate incomes, meet the City's regional share of housing needs, and implement the goals and objectives of the general plan and housing element. B. The adoption of a citywide affordable housing program will also assist in alleviating the use of available residential land solely for the benefit of households that are able to afford market rate housing because such market-rate development will be required to contribute to the provision of affordable housing for the entire Encinitas community, and will assist in alleviating the impacts of the service needs of households in new market-rate residential development by making additional affordable housing available. C. The City Council also desires to provide and maintain affordable housing opportunities in the community through an affordable housing program for both ownership and rental housing, and, in furtherance of that goal, includes rental affordable housing requirements in this chapter consistent with Government Code Sections 65850(g) and 65850.01. D. The City Council also desires to provide the residential development community with alternatives to construction of the affordable units on the same site as the market rate residential development. Therefore, this chapter includes a menu of options from which a developer may select an alternative to the construction of affordable units on the same site as the market rate residential development. Section 30.41.020 Definitions. The definitions set forth in this section shall govern the application and interpretation of this chapter. Words and phrases not defined in this section shall be interpreted so as to give this chapter its most reasonable application. A. "Affordable housing fund" means a fund or account designated by the City to maintain and account for all monies received pursuant to this chapter. B. "Affordable housing agreement" means an agreement in conformance with Section 30.41.090.B of this chapter between the City and an applicant, governing how the applicant shall comply with this chapter. C. "Affordable housing guidelines" means any requirements for implementation and administration of this chapter adopted by the City Council in accordance with Section 30.41.090.D of this chapter. D. "Affordable housing plan" means a plan containing all of the information specified in and submitted in conformance with Section 30.41.090.A of this chapter, specifying the manner in which affordable units will be provided in conformance with this chapter and any adopted affordable housing guidelines. 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 29 of 84

1849\05\2295814.1 2/8/2018 Attachment 4 E. Affordable rent means the maximum monthly rent, including an allowance for tenant paid utilities calculated at the specified income level in accordance with California Health and Safety Code Section 50053. F. Affordable sales price means the maximum purchase price that will be affordable to the specified household at the specified income level, calculated in accordance with California Health and Safety Code Section 50052.5. The affordable sales price shall include a reasonable down payment, and monthly housing payments (including interest, principal, mortgage insurance, property taxes, homeowner s insurance, homeowner s association dues, and a reasonable allowance for property maintenance, repairs, and utilities), all as determined by the City. G. Affordable unit means a dwelling unit required by this chapter to be affordable to very low, low, or moderate-low income households. H. "Applicant" or "developer" means a person, persons, or entity that applies for a residential development and also includes the owner or owners of the property if the applicant does not own the property on which development is proposed. I. "Approval body" means the body with the authority to approve the proposed residential development. J. "Area median income" or "AMI" means the annual median income for San Diego County, adjusted for household size, as published periodically in the California Code of Regulations, Title 25, Section 6932, or its successor provision, or as established by the City of Encinitas in the event that such median income figures are no longer published periodically in the California Code of Regulations. K. Building permit includes full structural building permits as well as partial permits such as foundation-only permits. L. "Common ownership or control" refers to property owned or controlled by the same person, persons, or entity, or by separate entities in which any shareholder, partner, member, or family member of an investor of the entity owns ten percent (10%) or more of the interest in the property. M. "Construction phase" means either: 1. The area included within one approved tentative subdivision map for residential development where a single final map implements the entire approved tentative map; 2. The area included within each separate final map for residential development where multiple final maps implement the entire approved tentative map; or 3. An area designated as a construction phase in an approved affordable housing plan. N. "Contiguous property" means any parcel of land that is: 1. Touching another parcel at any point; 2. Separated from another parcel at any point only by a public right of way, private street or way, or public or private utility, service, or access easement; or 3. Separated from another parcel only by other real property of the applicant which is not subject to the requirements of this chapter at the time of the planning permit application by the applicant. 2018-06-13 Item 10B 30 of 84

Attachment 4 O. Density bonus units means dwelling units approved in a residential development pursuant to California Government Code Section 65915 and Encinitas Municipal Code Section 30.16.020.C that are in excess of the maximum allowable residential density otherwise permitted by the City of Encinitas. P. "First approval" means the first of the following approvals to occur with respect to a residential development after the effective date of this chapter: planning permit or building permit. Q. Low income households are those households whose income does not exceed the low-income limits applicable to San Diego County as defined in California Health and Safety Code Section 50079.5 and published annually pursuant to Title 25 of the California Code of Regulations, Section 6932 (or its successor provision) by the California Department of Housing and Community Development. R. "Market rate unit" means a new dwelling unit in a residential development that is not an affordable unit. S. Moderate-income households are those households whose income does not exceed the moderate-income limits applicable to San Diego County as defined in California Health and Safety Code Section 50093 and published annually pursuant to Title 25 of the California Code of Regulations, Section 6932 (or its successor provision) by the California Department of Housing and Community Development. T. Ownership residential development means any residential development that includes the creation of one or more additional dwelling units that may be sold individually. A residential ownership development also includes the conversion of a residential rental development to a residential ownership development. U. "Planning area" means one of the five Encinitas communities (Cardiff, New Encinitas, Leucadia, Old Encinitas, and Olivenhain). V. Planning permit means any discretionary approval of a residential development, including but not limited to a general or specific plan adoption or amendment, rezoning, tentative map, parcel map, conditional use permit, variances, design review, or coastal development permit. W. Rental residential development means any residential development that creates one or more additional dwelling units that cannot be lawfully sold individually in conformance with the Subdivision Map Act. X. Residential development means any development for which a planning permit or building permit is required that includes the creation of one or more additional dwelling units, conversion of nonresidential uses to dwelling units, or the conversion of a use from a residential rental development to a residential ownership development. Y. "Surplus affordable unit" means any affordable unit constructed in connection with residential development and without any public subsidy, which exceeds the numerical requirement for affordable units for that residential development under this chapter. z. Very low-income households are those households whose income does not exceed the very lowincome limits applicable to San Diego County as defined in California Health and Safety Code Section 50105 and published annually pursuant to Title 25 of the California Code of Regulations, 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 31 of 84

Attachment 4 Section 6932 (or its successor provision) by the California Department of Housing and Community Development. Section 30.41.030 Applicability. The provisions of this chapter shall apply to: A. All residential development except for any residential development exempt under Section 30.41.040; and B. All residential development and contiguous properties that are under common ownership or control, Section 30.41.040 Exemptions. A. The following residential developments shall be exempt from the provisions of this chapter: 1. Residential developments with fewer than five seven dwelling units or lots. 2. Residential developments which are developed in accordance with the terms of a development agreement adopted by ordinance pursuant to the authority and provisions of California Government Code Section 65864 et seq., and that is executed prior to the effective date of the ordinance codified in this chapter, provided that such residential developments shall comply with any affordable housing requirements included in the development agreement or any predecessor ordinance in effect on the date the development agreement was executed. 3. Residential developments exempted by California Government Code Section 66474.2 or 66498.1, provided that such residential developments shall comply with any predecessor ordinance, resolution, or policy in effect on the date the application for the development was deemed substantially complete. 4. Residential developments for which a building permit an application for a planning permit has been issued and substantial work has been completed in good faith reliance on the permit deemed complete no later than the effective date of this chapter, provided that such residential developments shall comply with any predecessor ordinance, resolution, or policy in effect on the date the application for the development was approved deemed complete. B. Planning permit expiration. Upon the expiration of any planning permit, and unless otherwise exempted, the residential development shall be subject to the affordable housing requirements of this chapter, and shall not proceed until such time as an affordable housing plan is approved in conjunction with any other required planning permit or amendment thereto. The provisions of this chapter shall also apply to any residential development which is granted a discretionary extension of a planning permit beyond its initial term, to the extent consistent with state law. Section 30.41.050 Affordable Housing Requirement. All new residential developments, unless exempt under Section 30.41.040, and contiguous property under common ownership and control shall include affordable units. Calculations of the number of affordable units required by this section shall be based on the number of dwelling units in the residential development, excluding any density bonus units. 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 32 of 84

1849\05\2295814.1 2/8/2018 Attachment 4 A. On-site affordable requirement. Unless exempted from this chapter, or unless an alternative is approved as described in 30.41.080, residential developments shall include affordable units upon the same site as the residential development as follows: 1. Ownership residential development: the applicant shall provide either: a. Fifteen percent (15%) of the dwelling units in the residential development made available at affordable sales price to low-income households; or b. Twenty percent (20%) of the dwelling units in the residential development made available at affordable sales price to moderate-income households. 2. Rental residential development: the applicant shall provide either: a. Ten percent (10%) of the dwelling units in the residential development made available at affordable rent to very low-income households; or b.a. Fifteen percent (15%) of the dwelling units in the residential development made available at affordable rent to low-income households. B. In computing the total number of affordable units required in a residential development, fractions of a unit shall be rounded up to the next highest whole number. If the affordable housing requirements described in subsection A above result in a fractional unit, the applicant may either pay an in-lieu fee as specified in Section 30.41.080.E or may construct one additional affordable unit, at the applicant s option. C. When a residential development includes both ownership and rental dwelling units, the provisions of this chapter that apply to ownership residential development shall apply to that portion of the development that consists of ownership dwelling units, while the provisions of this chapter that apply to rental residential development shall apply to that portion of the development that consists of rental dwelling units. D. An applicant for a planning permit shall not avoid the requirements of this chapter by submitting piecemeal planning permit applications. At the time of the application for first approval for the residential development, the applicant shall identify all contiguous property under common ownership and control. The applicant shall not be required to construct dwelling units upon the contiguous property at the time of the application for first approval; however, the applicant shall be required to include the contiguous property under common ownership or control in its affordable housing plan. The affordable housing agreement shall be recorded against the residential development and all contiguous property under common ownership or control and shall require compliance with this chapter upon development of each contiguous property at such time as there are planning permit applications that would authorize a total of five seven or more residential units for the residential development and the contiguous property under common ownership or control. Section 30.41.060 Affordable Housing Standards and Incentives. A. Affordable units shall be comparable in exterior appearance and overall quality of construction to market-rate units in the same housing development. Interior finishes and amenities may differ from those provided in the market rate units, but neither the workmanship nor the products may be of substandard or inferior quality as determined by the City, b. The number of bedrooms and the size of the affordable units shall be comparable to the average number of bedrooms and average size of the market-rate units. The affordable units shall be 2018-06-13 Item 10B 33 of 84

Attachment 4 located so as not to create a geographic concentration of affordable units within the residential development. c.b. The affordable units shall have the same amenities as the market rate units, including the same access to and enjoyment of common open space, parking, storage, and other facilities in the residential development. d.c. The developer of a residential development providing all required affordable units upon the same site as the market-rate units may, at the developer's sole option and concurrently with the submittal of the affordable housing plan, submit a written request for one or more of the following on-site affordable housing development incentives: 1. Density bonus and other regulatory incentives pursuant to Government Code Section 65915 and the provisions of Section 30.16.020.C, if the residential development contains sufficient affordable units to qualify for a density bonus. If the applicant requests a density bonus, the other incentives listed in this subsection D may be provided only if each is individually requested as a regulatory incentive under Section 30.16.020.C. 2. Alternative unit type or size. The developer may request to provide affordable units within the residential development that are of a different unit type or size than the market rate units within the residential development, if the decision-making body finds that a smaller size or different type will provide adequate and decent affordable housing and will be compatible with the market-rate units. The affordable units shall have the same average bedroom count as the market rate units. 3.2. City assistance. The developer may request City staff to assist in the sale or rental of the affordable units to qualified households at an affordable housing cost. 4.3. Financial subsidies. The developer may apply for financial subsidies for the affordable units from any available federal and state funding sources. The developer may also apply for financial subsidy from City-administered funds for the difference in costs that results if the developer provides more affordable units or provides affordable units to households in income classifications that are lower than required. e.d. Affordable housing plan. The incentives requested by the developer shall be included in the proposed affordable housing plan submitted at the time of application for the first approval, and any incentives authorized by the City shall be included in the affordable housing plan, if approved by the City, for the residential development. Section 30.41.070 Timing of Construction of Affordable Units. All required affordable units shall be made available for occupancy concurrently with the market rate units. For the purposes of this subsection, "concurrently" means one of the following: A. The City may not issue building permits for more than fifty percent (50%) of the market rate units until it has issued building permits for all of the affordable units, and the City may not approve any final inspections or certificates of occupancy for more than fifty seventy five percent (5075%) of the market rate units until it has issued final inspections or certificates of occupancy for all of the affordable units. B. In-lieu fees, as appropriate, have been paid in accordance with Section 30.41.080.E.1. 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 34 of 84

1849\05\2295814.1 2/8/2018 Attachment 4 C. The applicant has met, or made arrangements satisfactory to the City to meet, an alternative requirement as permitted by Section 30.41.080. Section 30.41.080 Developers Alternative Compliance Options. A. Accessory dwelling units. As an alternative to providing single-family dwelling units as affordable units, an applicant may instead provide an affordable accessory dwelling unit for each required affordable unit, subject to the standards for accessory dwelling units contained in Section 30.48.040T. The term and affordability of the accessory dwelling units and the affordable housing agreement and rent regulatory agreement shall conform with the provisions of this Chapter 30.41 applicable to rental affordable units. In no event shall a developer be allowed to construct more than a total of five (5) ten (10) accessory dwelling units in any given residential development to satisfy the requirements of this Chapter. B. Rental units in an ownership residential development. The affordable housing requirement in Section 30.41.050.A.1 may be satisfied by providing ten fifteen percent (1015%) of the dwelling units in the residential development at affordable rent to very low income households. Any rent regulatory agreement shall include provisions to allow for the sale of the affordable units and relocation benefits for tenants of the affordable units if the owner of the ownership residential development later determines to offer any affordable units in the residential development for sale. At sale, appropriate documents shall be recorded to ensure affordability in perpetuity of the affordable units to very low income households. C. Off-site construction of affordable units. The applicant may propose to construct the affordable units required by Section 30.41.050.A on another site. The City may grant a credit for the off-site construction if the City Council makes all of the following findings, at the City s sole discretion: 1. The developer has demonstrated that the goals of this Chapter and the City s Housing Element would be better served by allowing some or all of the affordable units required by Section 30.41.050.A to be produced and operated at an alternative site or sites. 2. The off-site construction project represents a more effective and feasible means of implementing this Chapter and the goals of the City s Housing Element. Factors to be weighed in this determination include: the feasibility of the on-site option considering project size, site constraints, competition from other projects, difficulty in integrating due to significant price and product type disparity, lack of capacity of the on-site developer to produce or operate affordable housing. Also to be considered are whether the off-site option offers greater feasibility and cost effectiveness, particularly regarding potential local public assistance and any adopted affordable housing guidelines, location advantages such as proximity to jobs, schools, transportation, and services, diminished impact on other existing developments, capacity of the proposed affordable housing developer to deliver and operate the project, and satisfaction of multiple developer obligations that would be difficult to satisfy on multiple projects. 3. Financing or a viable financing plan, which may include public funding, shall be in place for the off-site affordable units. 4. The off-site location must be suitable for the proposed affordable housing, consistent with any adopted affordable housing guidelines and the Housing Element, will not tend to cause residential segregation, and be located within the same planning (community) area with appropriate infrastructure and services. Any off-site alternative must comply with the density, intensity and development standards that are permitted under the zone for the site. 2018-06-13 Item 10B 35 of 84

Attachment 4 5. All agreements between parties regarding off-site construction of affordable housing shall be made a part of the affordable housing agreement required for the site(s) and shall be subject to review and approval by the City Manager. c.d. Preservation or conversion of existing units. The affordable housing requirement in Section 30.41.050 may be satisfied by the preservation of existing affordable units at risk of loss or by conversion of market-rate units to affordable units, if the preservation or conversion of these units is consistent with Government Code Section 65583.1 and allows the City to substitute the preservation or conversion of these units for the obligation to identify adequate sites. d. In-lieu fees and off-site options. If the developer selects any of the compliance options in subsections C through G of this section, the affordable housing requirement shall be assumed to be increased by five percent (5%) over the affordable housing requirement described in Section 30.41.050, as follows: 1. Ownership residential development; either: a. Twenty percent (20%) of the dwelling units in the residential development made available at affordable sales price to very low income households; or, b. Twenty-five percent (25%) of the dwelling units in the residential development made available at affordable sales price to moderate-income households. 2. Rental residential development; either: a. Fifteen percent (15%) of the dwelling units in the residential development made available at affordable rent to very low income; or, b. Twenty percent (20%) of the dwelling units in the residential development made available at affordable rent to low income. The compliance options in subsections E through G of this section do not qualify the residential development for a density bonus or other regulatory incentives pursuant to Government Code Section 65915 and the provisions of EMC Section 30.16.020.C unless the dedication of land conforms to the provisions of Government Code Section 65915(g). No off-site alternative may be approved by the City if a density bonus or other regulatory incentive is requested for the site on which the affordable housing is to be built. Any off-site alternative must comply with the density, intensity and development standards that are permitted under the zone for the site. E. In-lieu fees. The affordable housing requirement in Section 30.41.050 may be satisfied by the payment of a fee to the City in-lieu of constructing the affordable units within the residential development. In-lieu fees may be established from time-to-time by resolution of the City Council or may be determined for a specific residential development through the preparation of an affordability gap analysis that will determine the difference between the affordable sales price or rent and the fair market rate price for the unit. 1. No certificate of occupancy shall be issued by the City for any market rate unit in the residential development until all in-lieu fees for the residential development have been paid to the City. 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 36 of 84

Attachment 4 2. Prior to recordation of any final or parcel map for the development, notice of this requirement shall be recorded against each lot in the subdivision. The developer shall provide specific written notice to any purchaser of any dwelling unit prior to the acceptance of any offer to purchase, and shall obtain executed acknowledgment of the receipt of such notice, that purchaser shall not have any right to occupy the dwelling unit until such time as all in-lieu fees owing for the residential development are paid to the City. 3. All in-lieu fees shall be deposited in the affordable housing fund described in Section 30.41.110. F. Dedication of land. The applicant may propose to meet the requirements of Section 30.41.050.A by dedicating property to the City in-lieu of constructing affordable units within the residential development. The City may approve property dedication under this subsection only if the proposal meets all of the following conditions: 1. The number of affordable units to be constructed on the dedicated property shall be at least 10 percent greater than the number of affordable units required under 30.41.050.A, or the affordable units to be constructed on the dedicated property shall provide units affordable to households in a lesser income category than required under 30.41.050.A (for example, very low-income units exclusively); 2. Financing or a viable financing plan, which may include public funding, shall be in place for construction of the affordable units on the dedicated property; and 3. The property to be dedicated is suitable for the proposed affordable housing, consistent with any adopted affordable housing guidelines and the Housing Element, and will not tend to cause residential segregation and is located within the same planning (community) area with appropriate infrastructure and services. The property shall be dedicated to the City prior to issuance of any building permit for the residential development. G. Affordable housing credits. The applicant may propose to meet the requirements of Section 30.41.050.A by obtaining credits for affordable units from a developer of surplus affordable units. The City may approve the use of credits under this subsection only if the proposal meets all of the following conditions: 1. A developer who constructs a surplus affordable unit may utilize that surplus affordable unit to satisfy the affordable housing requirement for future residential development for a period of no more than five ten (510) years after issuance of the certificate of occupancy for the surplus affordable unit. 2. A developer who constructs a surplus affordable unit may sell or otherwise transfer the surplus affordable credit to another developer in order to satisfy, or partially satisfy, the transferee developer's affordable housing requirement. 3. The transferee developer who utilizes any surplus affordable housing credit shall comply with the timing requirements for affordable units to be made available for occupancy concurrently with the market rate units in the residential development as required by Section 30.41.070. 4. No residential development that has received federal, state, or local financial assistance shall be deemed to have surplus affordable units. 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 37 of 84

Attachment 4 H. Other alternative compliance methods. A developer may propose an alternative compliance method to provide affordable units through other means. The decision-making body may approve or conditionally approve such an alternative only if the decision-making body determines, based on substantial evidence, that such alternative compliance will provide as many or more affordable units at the same or lower income levels and will otherwise provide greater public benefit than would provision of the affordable units on site. Section 30.41.090 Application and Review Procedures. A. Affordable housing plan. 1. An application for the first approval of a residential development shall include an affordable housing plan describing how the development will comply with the provisions of this chapter. As an alternative to compliance with the basic provisions included in Section 30.41.050, an applicant may propose one of the alternatives listed in Section 30.41.080 as part of the affordable housing plan. If in-lieu fees are requested, the applicant shall submit an affordability gap analysis. 2. Any adopted affordable housing guidelines may specify the contents of the affordable housing plan. No application for a first approval for a residential development may be deemed complete unless an affordable housing plan is submitted in conformance with this chapter. The cost of reviewing any affordability gap analysis or other proposed alternative, including but not limited to the cost to the City of hiring a consultant to review the application, shall be borne by the applicant. 3. The affordable housing plan shall be processed concurrently with all other permits required for the residential development. Before approving the affordable housing plan, the approval body shall find that the affordable housing plan conforms to this chapter. A condition shall be attached to the first approval of any residential development to require recordation of the affordable housing agreement described in Section 30.41.090.B prior to the approval of any final or parcel map or building permit for the residential development. 4. The approved affordable housing plan for a residential development, or for a building phase in a residential development, where phasing has been approved as part of planning permit approvals, may be amended prior to issuance of any building permit for the residential development or building phase, if applicable. A request for a minor modification of an approved affordable housing plan may be granted by the Development Services Director if the modification is substantially in compliance with the original affordable housing plan and conditions of approval. Other modifications to the affordable housing plan shall be processed in the same manner as the original plan. B. Affordable housing agreement. 1. The applicant shall enter into an affordable housing agreement with the City, in a form approved by the City Attorney, to be executed by the City Manager, to ensure that all the requirements of this Chapter are satisfied. The affordable housing agreement shall be recorded against the residential development prior to approval of any final or parcel map, or issuance of any building permit, whichever occurs first. 2. The affordable housing agreement shall specify the number, type, location, size, and phasing of all affordable units, provisions for income certification and screening of potential purchasers or renters of units, and resale control mechanisms, including the financing of ongoing 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 38 of 84

Attachment 4 administrative and monitoring costs, consistent with the approved affordable housing plan and any adopted affordable housing guidelines, as determined by the city manager or designee. C. The City Council, by resolution, may establish fees for the ongoing administration and monitoring of the affordable units, which fees may be updated periodically, as required. D. The City Council, by resolution, may adopt affordable housing guidelines to implement this chapter. Section 30.41.100 Continued Affordability. A. Any adopted affordable housing guidelines may include standard documents for execution by the City Manager, in a form approved by the City Attorney, to ensure the continued affordability of the affordable units approved for each residential development. The documents shall be recorded against the residential development, all affordable units, and any site subject to the provisions of this chapter. B. All affordable units shall remain affordable to the targeted income group in perpetuity for a minimum of 55 years. The affordable housing agreement shall guarantee the affordability of the affordable units to the targeted income group for a minimum of 55 years or a longer period of time if required by the construction or mortgage financing assistance program, mortgage insurance program, or rental subsidy program. C. Any eligible household that occupies an affordable unit must occupy that unit as its principal residence, unless otherwise approved in writing for rental to a third party eligible household for a limited period of time due to household hardship, as may be specified in any adopted affordable housing guidelines. D. No household may begin occupancy of an affordable unit until the household has been determined to be eligible to occupy that unit by the Development Services Director or designee. Any adopted affordable housing guidelines may establish standards for determining household income, affordable housing cost, provisions for continued monitoring of tenant eligibility, and other eligibility criteria. E. Officials, employees, or consultants of the City and members of city boards and commissions shall comply with all applicable laws, regulations, and policies relating to conflicts of interest as to their eligibility to develop, construct, sell, rent, lease, occupy, or purchase an affordable unit. Any adopted affordable housing guidelines shall include conflict of interest provisions relating to the administration of this chapter and the eligibility of persons to occupy affordable units. Section 30.41.110 Affordable Housing Fund. A. All in-lieu fees, promissory note repayments, or other funds collected under this chapter shall be deposited into the City s Affordable Housing Fund. B. The moneys in the Affordable Housing Fund and all earnings from investment of the moneys in the Fund shall be expended exclusively to provide housing affordable to extremely low-income, very low-income, lower-income, moderate-income households and any special needs populations in the City, consistent with the goals and policies contained in the City s Housing Element, and for administration and compliance monitoring of the affordable housing program, as approved by the City Council. 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 39 of 84

Attachment 4 Section 30.41.120 Waiver. A. Notwithstanding any other provision of this chapter, the requirements of this chapter may be waived, adjusted, or reduced based upon a showing that applying the requirements of this chapter would result in an unconstitutional taking of property or would result in any other unconstitutional result. B. Any request for a waiver, adjustment, or reduction under this section shall be submitted to the City concurrently with the affordable housing plan. The request for a waiver, adjustment, or reduction shall set forth in detail the factual and legal basis for the claim. C. The request for a waiver, adjustment, or reduction shall be reviewed and considered in the same manner and at the same time as the affordable housing plan. D. In making a determination on an application for waiver, adjustment, or reduction, the applicant shall bear the burden of presenting substantial evidence to support the claim. The City may assume each of the following when applicable: 1. That the applicant will provide the most economical affordable units feasible, meeting the requirements of this chapter and any adopted affordable housing guidelines; and 2. That the applicant will benefit from the incentives for the residential development as described in this chapter and elsewhere in the municipal code. E. The waiver, adjustment or reduction may be approved only to the extent necessary to avoid an unconstitutional result, after adoption of written findings, based on substantial evidence, supporting the determinations required by this section. If a reduction, adjustment, or waiver is granted, any change in the residential development shall invalidate the reduction, adjustment, or waiver, and a new application shall be required for a reduction, adjustment, or waiver pursuant to this section. Section 30.41.130 Enforcement. A. The City Attorney shall be authorized to enforce the provisions of this chapter and all affordable housing agreements, regulatory agreements, and all other covenants or restrictions placed on affordable units, by civil action and any other proceeding or method permitted by law. B. Failure of any official or agency to fulfill the requirements of this chapter shall not excuse any applicant or owner from the requirements of this chapter. No permit, license, map, or other approval or entitlement for a residential development shall be issued, including without limitation a final inspection or certificate of occupancy, until all applicable requirements of this chapter have been satisfied. C. The remedies provided for herein shall be cumulative and not exclusive and shall not preclude the City from any other remedy or relief to which it otherwise would be entitled under law or equity. SECTION FOUR: Severability. If any section, subsection, sentence, clause, phrase or word of this Ordinance is for any reason held to be invalid by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed and adopted this Ordinance, and each and all provisions hereof, irrespective of the fact that one or more provisions may be declared invalid. 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 40 of 84

Attachment 4 SECTION FIVE: Public Notice and Effective Date. The City Clerk is directed to prepare and have published a summary of the ordinance no less than five days prior to consideration of its adoption, and again within 15 days following adoption, indicating the votes cast. This Ordinance will become effective following certification by the California Coastal Commission as being consistent with the Local Coastal Program for the City of Encinitas and California Coastal Act. SECTION SIX: This Ordinance was introduced on June 13, 2018 and adopted on 2018. PASSED AND ADOPTED this day of, 2018 by the following vote to wit: AYES: NAYS: ABSTAIN: ABSENT: Catherine S. Blakespear, Mayor, City of Encinitas ATTESTATION AND CERTIFICATION: I hereby certify that this is a true and correct copy of Ordinance No. 2018-03 which has been published pursuant to law. Kathy Hollywood, City Clerk 1849\05\2295814.1 2/8/2018 2018-06-13 Item 10B 41 of 84

ATTACHMENT 5 INCLUSIONARY HOUSING WORKSHOP MARCH 7, 2018 CITY OF ENCINITAS 2018-06-13 Item 10B 42 of 84

THE QUESTION: What combination of inclusionary policies is likely to create the most high-quality units for low and very-low income occupants? 2018-06-13 Item 10B 43 of 84

The Panel Paul Barnes, Division President, Shea Homes San Diego Sue Reynolds, President & CEO, Community Housing Works Jim Schmid, Founder & CEO, Chelsea Investment Corp. (on behalf of BIA) Debbie Fountain, Housing and Neighborhood Services Director, City of Carlsbad 2018-06-13 Item 10B 44 of 84

Workshop Format 6:00-6:10 - Roll call, Pledge of Allegiance, Introductions, setting the stage 6:10-6:40 - Panelists opening comments - 5 minutes each Council/PC may ask clarifying questions 6:40-7:00 - Facilitated discussion of key points from panelists presentations Areas of agreement Areas of difference 7:00-7:10 - Questions/comments from the public (submitted in writing during first hour) 7:10-7:45 - Q&A from Council/PC; Council deliberation 7:45-8:00 - Wrap-up; next steps 2018-06-13 Item 10B 45 of 84

To What Projects Does the Policy Apply? All new development (commercial and residential)* 2018-06-13 All new residential development* Residential projects of 5 or more units *These options would require a nexus study. Item 10B Residential projects of 10 or more units Other? 46 of 84

What are possible compliance options? Build units on site (10%; 15%; other?) 2018-06-13 Pay a monetary fee ( in lieu or linkage ) Dedicate land or other tangible asset Item 10B Buy credits from projects producing more than required number of affordable units Other? 47 of 84

Secondary Questions How should in lieu fees be set? Should the City establish a formula for fees to provide more certainty to developers? Should/could HEU parcels be subject to different inclusionary requirements than other parcels developed under their existing zoning? Should the City conduct any additional studies? (Examples: economic feasibility study of increased % or different requirements for housing element sites; nexus study for commercial linkage fees or small projects; study of in-lieu fee formula) How will in lieu fees be used? What assurance is there that collected fees will create new housing units? What happens if the City takes no action on inclusionary housing? 2018-06-13 Item 10B 48 of 84

PANELISTS OPENING REMARKS Questions from Council and Planning Commission for clarification 2018-06-13 Item 10B 49 of 84

DISCUSSION - PANEL, CC, PC Public may write questions or comments and staff will collect them. 2018-06-13 Item 10B 50 of 84

PUBLIC QUESTIONS/COMMENTS If time permits; all will become part of public record. 2018-06-13 Item 10B 51 of 84

COUNCIL/PC DELIBERATION 2018-06-13 Item 10B 52 of 84

WRAP-UP AND NEXT STEPS; POSSIBLE COUNCIL DIRECTION 2018-06-13 Item 10B 53 of 84

City of Carlsbad Inclusionary Housing Presenter Name Date 2018-06-13 Item 10B 54 of 84

Affordable Housing Inclusionary Ordinance Ordinance adopted in 1993; amended in 2000 Requires 15% of all residential units be set-aside for lower income households For-sale units must be affordable to households at 80% of Area Median Income (AMI); rental units must be affordable to households at 70% AMI Seven units or more affordable units must be constructed; less than seven units developer may opt to pay a fee 2018-06-13 Item 10B 55 of 84

2010-2017 Deed Restricted 42 very low income homes 213 low income homes 56 moderate income homes 3 2018-06-13 Remaining RHNA 870 very low income 475 low income 833 moderate 0 above moderate Item 10B 56 of 84

Affordable Housing Status 2,247 affordable housing units have been constructed or acquired to meet the needs of low, very low, and extremely low income households: 1731 apartment units 300 townhomes 216 2nd dwelling units An additional 365 units approved & pending construction 4 2018-06-13 Item 10B 57 of 84

Success It is not just one thing 5 Flexibility in development options Production of Housing Credit projects Standards Modifications/density increases Financial Support Disbursement of housing throughout city Partnerships; collaborative developers Knowledgeable staff; creative problem solving skills 2018-06-13 Item 10B 58 of 84

Bonus/Increased Density Use density bonus law and concessions to obtain affordable units (state law) Use density increase and standards modifications (city ordinance & site development plan) to obtain affordable units Rezoned properties to higher density; considered increases on a case-by-case basis where the projects made sense. 6 2018-06-13 Item 10B 59 of 84

Other Affordable Housing Opportunities 7 Affordable Housing New Construction outside inclusionary Acquisition and Rehabilitation Tyler Court Senior Apartments (75 units) Chestnut Apartments (16 units) Solutions for Change La Posada Men s Transitional Shelter & Farmworker Housing (100 beds total) Rental Assistance over 600 Section 8 vouchers for very low income families CDBG/HOME federal funding for housing-related social service programs and new affordable housing units; funded 2 developments in Vista through partnerships Considering a shared housing program for Low Income Seniors Considering a Rental Housing Impact Fee additional funding source 2018-06-13 Item 10B 60 of 84

Income Limits FY 2017 San Diego County Area Median Income (AMI) = $79,300 (HH of 4) 8 Income Group 2 Person Household 4 Person Household 6 Person Household 8 Person Household Extremely Low (30% AMI) $21,800 $27,250 $32,960 $41,320 Very Low (50% AMI) $36,400 $45,450 $52,750 $41,320 Low (60% AMI) $43,650 $54,550 $63,300 $72,050 Low (80% AMI) $58,200 $72,750 $84,400 $96,050 2018-06-13 Item 10B 61 of 84

For More Information Please visit our website: www.carlsbadca.gov/housing or call (760) 434-2810 Debbie Fountain, Director Housing & Neighborhood Services 9 2018-06-13 Item 10B 62 of 84

COMPARISON OF 4 HOMES VS. 5 HOMES (1 INCLUSIONARY SOLD AT $250,000) 4 MARKET RATE HOMES +1 AFFORDABLE 4 MARKET RATE HOMES Revenue $ Cost $ Profit $ 2018-06-13 Revenue Cost Profit 4,980,000 (4,476,000) 504,000 Item 10B $ $ $ 5,210,000 (4,862,000) 348,000 63 of 84

DISPARATE INCLUSIONARY REQUIREMENTS DUE TO ROUNDING UP 2018-06-13 Item 10B 64 of 84

REPRESENTATIVE HOME INCLUDING ACCESSORY UNIT 2018-06-13 Item 10B 65 of 84