Council Meeting: July 12, 2005
TO: Mayor
and City Council
FROM: City Staff
SUBJECT: Resolution to Increase the Affordable Housing Fee and Introduction
and First Reading of an Ordinance Amending the Affordable Housing Production
Program to Establish a Reduction or Waiver Provision of Chapter 9.56 and to Modify
Affordable Housing Definitions and Consideration of Other Amendments to Provide
for the Annual Adjustment of the Affordable Housing Fee and the Timing of the
Affordable Housing Fee Calculation for a Particular Development
INTRODUCTION
This staff report recommends that the City Council
adopt the attached resolution increasing the Affordable Housing Fee for apartment
and condominium developments and introduce and approve for first reading the
attached ordinance amending Chapter 9.56 of the Municipal Code, the Affordable
Housing Production Program (“AHPP”), to establish a hardship provision that
allows for the reduction or waiver of the AHPP and to modify affordable housing
definitions. This staff report further recommends
that the City Council amend the AHPP to provide for an annual adjustment to the
Affordable Housing Fee and to provide that the Affordable Housing Fee that a
particular development must pay be based on the Affordable Housing Fee in
effect at the time the payment is made.
These recommended revisions to the AHPP are included in the attached
ordinance.
On November 25, 2003, the
City Council directed staff to evaluate the Affordable Housing Production
Program and/or other City programs and policies, and suggest ways to update
these provisions to facilitate meeting the Proposition R affordable housing
goals (that 30% of all newly constructed multifamily housing each year be
affordable to low and moderate income households).
At its May 10,
2005 meeting, staff presented to Council various strategies to increase
affordable housing. The May 10, 2005
staff report and preliminary consultant analysis by Hamilton, Rabinovitz &
Alschuler (HR&A) is provided in Attachment A.
This matter was then
continued to the Council meeting of May 17, 2005.
At its May 17, 2005
meeting, after consideration of the various options presented, the City Council
directed staff to prepare a resolution to reflect new affordable housing fees
as supported by an updated (2005) Nexus Study prepared by HR&A. Additionally, Council directed staff to
prepare an amendment to the AHPP that allows for an administrative hardship
remedy regarding the AHPP’s provisions. Other
requested changes to the AHPP regarding on-site unit provisions and developer
options in building affordable units will be evaluated over the next several
months.
DISCUSSION
In the May 10, 2005 staff report and hearing on the matter, staff
detailed the basis for updating the Affordable Housing Fee. This rationale includes changes in the real
estate market (rents and purchase prices), the availability of new household
income and spending data (2000 Census and a revised household spending model), and
the increased costs of constructing affordable multifamily housing (land,
construction materials and labor). The
May 10, 2005 staff report and HR&A presentation is included as Attachment A
for reference.
Subsequent to the
May 17, 2005 Council meeting, HR&A completed its Nexus Study. The 2005 Nexus Study supports an Affordable
Housing Fee of $22.33 for apartment developments and $26.08 for condominium
developments, and is provided in Attachment B.
This updated Affordable Housing Fee is based on a weighted average,
which reflects the location of multifamily development activity in Santa Monica
and the household spending patterns from those census tracts where development
activity is occurring. The Resolution setting
forth the new Affordable Housing Fee is provided in Attachment C.
In conjunction with the
update of the Affordable Housing Fee, the AHPP would establish an
administrative hardship remedy. The
proposed Ordinance in Attachment D amends the AHPP to provide an administrative
remedy available for any developer who contends that the AHPP, as applied to
his or her property, violates either the Federal or State constitution. This amendment will replace the current
requirement that the City conduct an economic analysis as part of the fee
adoption process and is consistent with current case law.
The proposed Ordinance also
revises Section 9.56.20 of the AHPP to include “moderate income households” in
the definitions of “Affordable Housing Fee” and “Affordable Housing Unit.” This revision is consistent with the analysis
undertaken in the 2005 Nexus Study.
Additionally, the definition of “Low, Very Low, and Moderate Income
Levels” is clarified to be based on the estimate of median income for a
four-person household, to be consistent with federal and state affordable
housing programs.
Staff recommends the
Council consider two other amendments to the fee provisions of the AHPP. One amendment would provide for an annual
update of the Affordable Housing Fee and the other amendment would change the
timing when the Affordable Housing Fee for a particular development is calculated. Both of these amendments are reflected in the
proposed Ordinance in Attachment D.
The AHPP currently provides
for periodic recalculation of the Affordable Housing Fee to account for changed
housing market circumstances, but this is not an annual adjustment. The AHPP should be amended to provide that
the Affordable Housing Fee be adjusted annually, so that it keeps pace with
changes in housing market conditions.
The annual adjustment feature would be similar to the City’s existing office
mitigation fee (1/2 of which is used for affordable housing), except that the
office mitigation fee is adjusted monthly (see SMMC 9.04.10.12) by changes in
the Consumer Price Index. The annual
adjustment of the Affordable Housing Fee would reflect changes in construction and
land costs, rather than changes in the price of consumer goods.
Currently, the AHPP also
establishes that the amount of the Affordable Housing Fee for a particular
development is the fee “in effect at the time that the application for the
multi-family project is deemed complete” (SMMC 9.56.070[b]). However, the Affordable Housing Fee payment
is not due until the development is completed, so there is a multiple-year
period between the time the Affordable Housing Fee for a development is first calculated
and the time it is actually paid. During
this multi-year period, construction and land costs can change
significantly. Therefore, the AHPP should
be amended to provide that the amount of the Affordable Housing Fee for a
particular development would be based on the Affordable Housing Fee in effect
at the time it is actually paid.
The updated Affordable
Housing Fee and the revised AHPP will be applicable to any project whose
application is determined completed after May 30, 2005 unless the applicant can
otherwise establish a vested right.
The amount of fee revenue produced as a result of this resolution depends on the number and scale of projects that apply for building permits. The Affordable Housing Fee is deposited into an affordable housing reserve account in the Special Revenue Fund to be used only for the development of affordable housing and appropriated in accordance with established budget procedures and necessary Council approvals. Approval of the resolution increasing the Affordable Housing Fee does not have a financial or budgetary impact at this time.
RECOMMENDATION
It is recommended that the City Council adopt the
attached Resolution increasing the Affordable Housing Fee for apartment and condominium
developments and introduce and approve for first reading the attached ordinance
amending Chapter 9.56 of the Municipal Code, the Affordable Housing Production
Program, to establish a hardship provision that allows for the reduction or
waiver of the AHPP and to modify affordable housing definitions. It is further recommended that the City
Council amend the AHPP to provide for an annual adjustment to the Affordable
Housing Fee and to provide that the Affordable Housing Fee due for a particular
development be based on the Affordable Housing Fee in effect at the time the
payment is made. These recommended
revisions to the AHPP are included in the attached ordinance.
Prepared by: Jeff Mathieu, Director, Resource Management Department
Ron Barefield, Acting Housing & Redevelopment Manager
Jim Kemper, Acting Housing Administrator
ATTACHMENTS
Attachment A: May 10, 2005 Staff Report Regarding Strategies to Increase Affordable Housing and HR&A Presentation
Attachment B: Nexus Study (2005) Updating the Affordable Housing Fee
Attachment C: Resolution Increasing Affordable
Housing Fee
Attachment D: Ordinance Amending Chapter 9.56 of the Municipal Code