Planning Commission February 12, 2015

Planning Commission February 12, 2015 Proposal: AFFORDABLE HOUSING ORDINANCE UPDATE - Citywide - PLN2015-00145 - To consider a Zoning Text Amendment to update the Affordable Housing Ordinance (Fremont Municipal Code Chapter 18.155) for conformity with the General Plan (PLN2015-00145). The proposed project is an implementation measure of the adopted General Plan for which a Final Environmental Impact Report (EIR) (SCH#2010082060) was previously certified and, therefore, no further environmental review is required. Recommendation: Location: People: Recommend adoption of the proposed zoning text amendments to City Council Citywide City of Fremont, applicant Dan Schoenholz, Deputy Community Development Director EXECUTIVE SUMMARY The proposed amendments to the City s Affordable Housing Ordinance are being recommended to assist the City in meeting its Regional Housing Needs Allocation (RHNA) in accordance with its recently adopted Housing Element. The new Affordable Housing Ordinance also reflects findings from the recently prepared Nexus Study and stakeholder input that has occurred since the study was released in August of 2014. Staff is recommending that the Planning Commission recommend approval of the proposed Zoning Text Amendment. BACKGROUND AND PREVIOUS ACTIONS In 2002, the City adopted its first Inclusionary Housing Ordinance. The ordinance required that developers set aside 15 percent of all units proposed in residential projects as affordable to moderate-income households. This ordinance resulted in the production of several hundred moderate-income ownership units scattered throughout new developments in the City. It also resulted in 45 affordable rental units being produced. In lieu-fees were only allowed in instances where lots averaged 10,000 square feet or larger in size. Only one project qualified to pay the in-lieu fee during this period. In 2008-09, stakeholders met with City staff to discuss desired changes to the ordinance. Developers wanted additional flexibility to meet ordinance requirements and affordable housing advocates wanted the City to focus on the needs of lower income households. Additionally, during this timeframe two court decisions affected how cities evaluate and develop affordable housing ordinances. In order to address these matters, the City commissioned its first Nexus Study to document and quantify the impacts associated with the development of market rate housing on the need for affordable housing. The result of this effort was the adoption of a new ordinance that created additional alternatives to the basic 15 percent moderate-income inclusionary requirement. The most notable alternative was the adoption of a housing in-lieu fee that could be paid for ownership projects and a housing impact fee that was required for rental projects to meet the mandates of the new court decisions. Page 1

The new ordinance was adopted at the height of the recent recession and to address this concern, the City Council adjusted the in-lieu and impact fees downward by 33 percent and established that for each of the following three years the fees would adjust upwards by 11 percent to their intended rate of $19.50 per square foot (or $22.50 for homes on lots greater than 6,000 square feet). The ordinance also provided that the base requirement be raised to 20 percent as of January 1, 2015, if supported by a new Nexus Study and if findings were made by the City Council. A new Residential Nexus Analysis (Nexus Study) was prepared by Keyser Marston Associates in August 2014. The conclusion of the Nexus Study was that a 20 percent requirement was supported for single-family home developments but only 18 percent was supported for townhome-type developments and 17.4 percent for condominium-type developments. Concurrent with the Nexus Study, staff was working with stakeholders on the update of the Housing Element of the General Plan and was also developing a Notice of Funding Availability for affordable housing development/rehabilitation. During stakeholder meetings and work sessions with the City Council and Planning Commission on these topics as well as on the Nexus Study, staff received input on possible revisions to the Affordable Housing Ordinance which was used to develop a draft framework for revising the Ordinance. This draft framework was presented to the City Council on December 16, 2014, and to the Planning Commission on January 22, 2015. The staff report from the Council meeting; an analysis of the draft framework and a more general legal analysis of nexus studies prepared for the Building Industry Association (BIA) submitted prior to the Council meeting; and a response to the BIA report prepared by Keyser Marston are all attached for information. Two written comments (from Hayes Shair and Alice Cavette) were received after the Council work session and are also attached. PROCEDURE FOR TONIGHT S HEARING At tonight s hearing, the Planning Commission will be considering staff s recommendation for approval to the City Council of the proposed Zoning Text Amendment, based upon findings specified in Section 18.225.050 of the Fremont Municipal Code. PROJECT DESCRIPTION The proposed Affordable Housing Ordinance amendments include: Updating the Basis and Purposes section to reflect new RHNA numbers, the newly adopted Housing Element and new Nexus Study as well as the new affordable housing proposal. Adding new definitions for Housing unit, Attached, Housing unit, Detached and Very low-income households. Deleting the definition of Redevelopment project subarea and removing all references to Redevelopment throughout the document as a result of the Redevelopment Dissolution Act. Replacing the terms in-lieu fee and impact fee with the term affordable housing fee. Revising the Basic Requirement section to reflect the new affordable housing proposal. AFFORDABLE HOUSING ORDINANCE UPDATE - Citywide - PLN2015-00145 Page 2

The proposal encourages production of the moderate-income component on-site and requires payment of an affordable housing fee in for-sale projects to be used for lowerincome households. The proposal would lower affordable housing fees for rental projects in an effort to stimulate rental housing production. Units of 700 square feet or less in size would be further stimulated by lowering the proposed fee by 50 percent. Table 1, below summarizes the proposal in terms of requirement and/or fees. Revising the Basic Requirement section for rental projects to clarify that developers can propose providing on-site units through a development agreement or affidavit as an alternative to paying the affordable housing fee. Adding a new grandfathering provision to the Timing of Performance section and deleting the prior grandfathering provisions. Updating the Alternatives section to: 1) require that affordable units provided under an alternative be roughly equivalent in value to the Basic Requirement outlined above; 2) update the rental nexus percentages where ownership affordable units are initially rented; and 3) create a new alternative that allows for proposals that would increase ownership affordability instead of payment of affordable housing fees for lower-income households. Amending the Establishment of fees section to reflect a revised provision for rate increases to existing fees. Deleting references to the use of funds generated by the Affordable Housing Ordinance for Supportive Services. In the future, the City can elect to use City allocated housing funds for such services. TABLE 1 SUMMARY OF BASIC REQUIREMENTS OWNERSHIP PROJECTS On-Site Mod. % Fee (No On-Site) Fee (With On-Site) Detached Housing 1 4.5% $26.00 $17.50 Attached Housing 2 3.5% $27.00 $18.50 RENTAL PROJECTS Affordability for On-Site Rental Project Production 3 Fee With Subdivision Map 6.6% VL+ $27.00 Without Subdivision Map 3.2% L+ $17.50/$8.75 4 3.1% M 1 2 3 4 Includes all forms of detached housing units (e.g., single-family homes). Includes all forms of attached housing units (e.g., townhomes, condominiums and stacked flats). For purposes of this Section attached shall mean that units share at least 75% of one common wall. Applies only to for sale projects that voluntarily elect to use the rental production alternative in lieu of Ownership Project options listed above. Units at or below 700 gross square feet in size pay the lower amount. As referenced above, the proposed ordinance also contains a new alternative addressing for-sale projects that may wish to provide deeper levels of affordability with on-site units. This alternative was created in response to Planning Commission comments made at the AFFORDABLE HOUSING ORDINANCE UPDATE - Citywide - PLN2015-00145 Page 3

January 22, 2015 work session. Density Bonus Laws. This alternative also correlates with state-mandated PROJECT ANALYSIS General Plan Conformance The recently adopted Housing Element (December 2014) speaks specifically to the goals, policies and actions required including an update of the City s Affordable Housing Ordinance. GOAL 3: Encourage the Development of Affordable and Market-Rate Housing in Order to Meet the City s Assigned Share of the Regional Housing Need Allocation (RHNA). Very Low Income 1,714 31% Low Income 926 17% Moderate 978 18% Above-Moderate 1,837 34% Total RHNA: 5,455 100% POLICY 3.01 Be creative and a leader in identifying and leveraging available funding resources in order to provide the maximum amount of affordable housing. Action 3.01-B: Update Affordable Housing Ordinance. The City s Affordable Housing Ordinance requires that at least 15 percent of all for-sale dwelling units be made available at an affordable cost. Market-rate rental housing is required to pay an affordable housing impact fee. Affordable housing is exempt from impact fees. The Ordinance was modified in 2010 and 2011 to provide flexibility to developers by allowing them the option of building affordable units on-site or fulfilling their obligation by paying the City an in-lieu fee, or proposing an alternative form of compliance outlined in the Ordinance such as off-site construction, property dedication, or purchase of existing marketrate units for conversion to affordable ownership units. The City will update the Affordable Housing Ordinance following completion of a Nexus Study. As a result of the Nexus Study, City staff is proposing amendments to the Affordable Housing Ordinance that will have the effect of encouraging the production of more affordable units at deeper affordability levels through incentives for creation of on-site affordable units and the generation of funds that can be used for the production of affordable units. These mechanisms further the General Plan goal and policy to maximize affordable housing throughout the City. FINDINGS FOR APPROVAL In order to adopt the Zoning Text Amendment, the City Council must make the following findings found in FMC Section 18.225.050: The proposed amendments are consistent with the general plan; and The proposed amendments further the public interest, convenience, and general welfare of the city. Analysis Based on the General Plan Conformance analysis above, staff believes that the proposed Zoning Text Amendment would be consistent with the policies and goals of the General Plan. The proposed amendments further the public interest, convenience and AFFORDABLE HOUSING ORDINANCE UPDATE - Citywide - PLN2015-00145 Page 4

general welfare of the city by aligning the Zoning Ordinance with the City s goals for providing more affordable housing. CITY FEES The basic requirement set forth in this proposal would require payment of affordable housing fees to accommodate the needs of lower-income households within ownership projects and provide a fee option to accommodate needs of moderate-income households. Furthermore, the ordinance would require payment of an affordable housing fee within rental projects. The proposal being made is that fees be phased-in as shown in Table 2, below. TABLE 2 Proposed Phase-in of Affordable Housing Fees For-Sale Residential Project deemed complete for processing after [insert ordinance effective date]: Through July 2016- Beyond June 2016 June 2017 July 2017 a. Lower income attached units 1 $11.00 $14.25 $18.50 b. Lower income detached units 1 $11.00 $13.25 $17.50 c. Moderate-income units 2 $ 8.50 $ 8.50 $ 8.50 For-Sale Housing Fee 4 for projects deemed complete for processing prior to [insert ordinance effective date]: Through July 2016- Beyond June 2016 June 2017 July 2017 d. Single-Family Homes on Lots 6,000 SF or greater $22.50 -- Rates Indexed 5 -- e. All other Market-Rate, For-Sale units $19.50 -- Rates Indexed 5 Rental Housing Fees 3 (All projects): Through July 2016- Beyond June 2016 June 2017 July 2017 Without underlying subdivision map: f. Units greater than 700 gross square feet $17.50 $17.50 $17.50 g. Units less than or equal to 700 gross square feet $ 8.75 $ 8.75 $ 8.75 h. With underlying subdivision map $19.50 $22.75 $27.00 1 2 3 4 5 Fee per habitable square foot of market-rate housing in for-sale residential projects to mitigate the cost of construction for lower income units, as required by Fremont Municipal Code Section 18.155.030(a). Lower income includes extremely low-, very low- and low-income units. Fee per habitable square foot of market-rate housing in for-sale residential projects in lieu of construction of moderate-income units on-site, as permitted by Fremont Municipal Code Section 18.155.080(f). Fee per habitable square foot of rental housing to mitigate the project s impact on the need for affordable housing where the rental project is not providing affordable rental housing by agreement with the City pursuant to Municipal Code Section 18.155.030(b)(1). Fee per habitable square foot of market-rate housing in for-sale residential projects in lieu of construction of affordable units on-site, as previously permitted by Fremont Municipal Code Section 18.155.080(f). Based upon Engineering News Record McGraw-Hill Construction Weekly Building Cost Index for San Francisco but no higher than justified by the Nexus Study. ENVIRONMENTAL REVIEW AFFORDABLE HOUSING ORDINANCE UPDATE - Citywide - PLN2015-00145 Page 5

The proposed project is an implementation measure of the adopted General Plan for which a Final Environmental Impact Report (EIR) (SCH#2010082060) was previously certified and, therefore, no further environmental review is required. PUBLIC NOTICE AND COMMENT A 1/8 page display ad was published in The Argus on January 31, 2015. Additional electronic notification has been provided directly to stakeholders and those persons and organizations that have specifically requested notification. RECOMMENDATION 1. Hold public hearing. 2. Recommend that the City Council find the proposed Zoning Text Amendment is an implementation measure of the General Plan for which an Environmental Impact Report was prepared and certified and that no further environmental review is required. 3. Find that the proposed Zoning Text Amendment is consistent with the General Plan. 4. Find the proposed Zoning Text Amendment furthers the public interest, convenience, and general welfare of the city. 5. Recommend that the City Council introduce an ordinance approving the proposed Zoning Text Amendment as set forth in the Draft Ordinance (Exhibit A ). ENCLOSURES Draft Affordable Housing Ordinance Amendment (Redline) Draft Affordable Housing Ordinance Amendment (Clean) Residential Nexus Analysis-Keyser Marston Associates BIA DFA Fremont PR Cover Letter 5Dec14 BIA Evaluation of Residential Nexus Analysis Keyser Marston Response to BIA Evaluation Dec. 17, 2014 Email from Hayes Shair Jan. 5, 2015 Email from Alice Cavette December 16, 2014 City Council Staff Report Perkins Coie Legal Analysis of Post Palmer and Patterson Nexus Studies AFFORDABLE HOUSING ORDINANCE UPDATE - Citywide - PLN2015-00145 Page 6