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HomeMy WebLinkAbout4.03 Inclusionary Zone Reg~~ -' -i~ \~V/~:' CITY CLERK File # ^0~ 0^-~~ AGENDA STATEMENT CITY COUNCIL MEETING DATE: December 2, 2008 SUBJECT: PA 08-041 Amendments to the City of Dublin Inclusionary Zoning Regulations Report Prepared by John Lucero, Housing Specialist and John Bakker, City Attorney ATTACHMENTS: 1) Ordinance Amending Chapter 8.68 of the Dublin Municipal Code relating to Establishing Fixed Sales Prices for Owner- Occupied Inclusionary Units; Eliminating the Requirement to Construct Owner-Occupied Very-Low Income Units; and, Altering the For-Sale Inclusionary Unit Income Ratios. 2) Chapter 8.68 of the Municipal Code. 3) City Council Staff Report dated November 18, 2008 (without attachments). RECOMMENDATION: Waive the second reading and adopt an Ordinance of the City of Dublin Amending Chapter 8.68 of the Dublin Municipal Code (the ~~ Inclusionary Zoning Regulations) relating to establishing fixed sales ~ prices for owner-occupied inclusionary units; eliminating the ~, ~ requirements to construct owner-occupied very-low income units; ~ ~ and, altering the for-sale inclusionary unit income ratios (PA 08- 041). FINANCIAL STATEMENT: There would be no additional financial impact for Staff to administer the proposed Amendments to Chapter 8.68, Inclusionary Zoning Regulations. PROJECT DESCRIPTION: On July 9, 1996, the City Council adopted the first version of the Inclusionary Zoning Regulations (Ordinance 14-96). The purpose of the Inclusionary Zoning Regulations was to further the City's goal of making available an adequate supply of housing for persons of all economic segments of the community, and contributing to the attainment of this goal by increasing the production of residential units affordable COPY TO: Planning Commission Housing Committee Interested Developers K:\StaffReports- PC and CC\2008\CCUZO\12-2-08CCSR.doc Page 1 of 3 ITEM NO. ~]• 3 to households of very low-, low-, and moderate-incomes. Over the years, there have been modifications to the Inclusionary Zoning Regulations which include changes to the amount that developers may pay as in-lieu fees; the required percentage of affordable units a developer must build; the length of time units must remain affordable; and the way the sales price and rent are calculated. On May 21, 2002, the City Council substantially amended the Inclusionary Zoning Regulations which included modifications to Section 8.68.020A (Attachment 2), which established criteria on how rents and sales prices were calculated. Staff has been implementing this Ordinance for the past several years and noting where changes should be made to keep the Inclusionary Zoning Regulations current. In addition, during this last year, there were major changes in the financing markets. Staff and the City Council thought the time had come up update the City's Inclusionary Zoning Regulations to address these changes. At the City Council meeting of March 3, 2008, the City Council established Goals and Objectives for FY 2008-2009. Mayor Lockhart proposed an objective that read "Review effectiveness of the City's current Inclusionary Zoning Ordinance" (Goal 5 under Housing). The proposed Ordinance and changes to the Layperson's Guide that was approved contingent upon the approval of the Ordinance, address this Goal. The proposed Ordinance makes several amendments to the Inclusionary Zoning Regulations as follows: ~ Sales prices of Owner-Occupied Inclusionary Units will be based on fixed income levels and household sizes rather than calculating the price on a case by case basis. • Owner Occupied very-low income units will no longer be required. As a result, the income ratios for owner-occupied below market rate units would change to: 0 60% to moderate-income households 0 40% for low-income households 0 0% for very-low income households The current ratio for rental properties has not been a problem and appears to be acceptable within the current market. Therefore, Staff is not proposing any changes. The ratios would remain: 0 50% to moderate-income households 0 20% to low-income households 0 30% to very-low-income households Ordinances can be changed, and it is important to note that should the market change and new loan products become available, the City Council could revisit this issue in the future. October 7, 2008 Development Community Meeting On October 7, 2008, Staff met with members of the development community to go over the proposed modifications to the Inclusionary Zoning Regulations and Layperson's Guide. All attendees expressed support of Staff's proposals. October 9, 2008 Housing Committee Meeting At the October 9, 2008 Housing Committee meeting, members of the Committee received an informational presentation from Staff regarding the proposed revisions to the Inclusionary Zoning Regulations, and unanimously recommended the Planning Commission review the proposed revisions to Dublin's Inclusionary Zoning Regulations. 2 of 3 October 28, 2008 Planning Commission Meeting At the October 28, 2008 Planning Commission meeting, members of the Commission received an informational presentation from Staff regarding the proposed revisions to the Inclusionary Zoning Regulations, and unanimously approved Resolution No. 08-35, recommending that the City Council adopt an Ordinance amending Chapter 8.68 of the Dublin Municipal Code. November 18, 2008 City Council Meeting On November 18, 2008, the City Council heard a presentation from Staff and conducted a public hearing on the proposed Ordinance. The City Council waived the reading and introduced the Ordinance amending the Inclusionary Zoning Regulations. At the same meeting, the City Council approved the revisions to the Layperson's Guide with the same effective date as the amended Inclusionary Zoning Regulations. A copy of the November 18, 2008, Staff Report is attached for reference (Attachment 3). As required by the City of Dublin Municipal Code, a second reading is necessary prior to final adoption of the Ordinance amending the Inclusionary Zoning Regulations. IMPLEMENTATION: The City has adopted several form legal documents such as the Resale Restriction Agreement, Regulatory Agreements for Rental Projects, and standard affordable housing agreements. These documents will be updated to reflect the changes to the Inclusionary Zoning Regulations and the Laypersons Guide. Once the Ordinance becomes effective, Staff will begin using the revised legal documents. Several projects are being constructed presently that may wish to take advantage of the amendments to the Inclusionary Zoning Regulations. The proposed Ordinance provides that developers of existing projects with unsold Inclusionary.Units may seek an amendment to their affordable housing agreements to allow them conform to the amended Ordinance and that the City Manager may execute such an amendment. ENVIRONMENTAL REVIEW: The proposed update to the Inclusionary Zoning Regulations is exempt from the California Environmental Quality Act based on the following findings: The Inclusionary Zoning Regulations are not a "project" within the meaning of Section 15378 of the State California Environmental Quality Act Guidelines, because it has no potential for resulting in physical change in the environment, directly or ultimately. The proposed Inclusionary Zoning Regulations do not, in itself, allow the construction of any building or structure. CONCLUSION: After several. years of administering the Inclusionary Zoning Regulations, it has become necessary to update the Inclusionary Zoning Regulations to provide easier implementation by both the development community and City Staff. In addition, the update addresses difficulties in the marketing and sale of very- low-income units. RECOMMENDATION: Staff recommends that the City Council: Waive the second reading and adopt an Ordinance of the City of Dublin Amending Chapter 8.68 of the Dublin Municipal Code (the Inclusionary Zoning Regulations) relating to establishing fixed sales prices for owner-occupied inclusionary units; eliminating the requirements to construct owner-occupied very-low income units; and, altering the for-sale inclusionary unit income ratios (PA 08-041). 3 of 3 ~s~ ORDINANCE NO. XX - 08 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DUBLIN AMENDING CHAPTER 8.68 OF THE DUBLIN MUNICIPAL CODE (THE INCLUSIONARY ZONING REGULATIONS) RELATING TO ESTABLISHING FIXED SALES PRICES FOR OWNER-OCCUPIED INCLUSIONARY UNITS; ELIMINATING THE REQUIREMENT TO CONSTRUCT OWNER-OCCUPIED VERY-LOW INCOME UNITS; AND, ALTERING THE FOR-SALE INCLUSIONARY UNIT INCOME RATIOS (PA 08-041) THE CITY COUNCIL OF THE CITY OF DUBLIN DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. Amendment of Section 8.68.020: Subdivision A of Section 8.68.020 of the Dublin Municipal Code is amended to read as follows: A. "Affordable Unit" means an ownership or rental-housing unit, including senior housing, affordable to households with very-low, low, or moderate incomes as defined in this chapter. 1. Rental units are deemed affordable units if the annual rent does not exceed 30% of maximum income level for low- and moderate-income households, adjusted for household size and as defined below. 2. Owner-occupied units are deemed affordable units if the sales price results in annual housing expenses that do not exceed 35% of the maximum income level for very-low-, low-, and moderate-income households, adjusted for household size and as defined below. SECTION 2. Amendment of Section 8.68.030. Subdivision B of Section 8.68.030 of the Dublin Municipal Code is amended to read as follows: B. Allocation of Units to Income Levels. Affordable units provided pursuant to this section shall be allocated to households with very-low, low-, and moderate-income levels as follows: Rental Units Owner-Occupied Units Very-low-income households 30% 0% Low-income households 20% 40% Moderate-income households 50% 60% Where the calculation of the allocation results in fewer units that would otherwise be required pursuant to subdivision A above, one additional unit should be allocated to the income level with a decimal fraction closest to 0.50." 1 of 3 Attachment 1 2,~ --, SECTION 3. Compliance with California Environmental Quality Act ("CEQA'): The City Council declares that this ordinance is exempt from CEQA based on the following findings: This ordinance is not a "project" within the meaning of Section 15378 of the State CEQA Guidelines, because it has no potential for resulting in physical change in the environment, directly or ultimately. This ordinance does not, in itself, allow the construction of any building or structure. This ordinance, therefore, has no potential for resulting in physical change in the environment, directly or ultimately. SECTION 4. Conforming Changes to Resale Restriction Agreement. Chapter 8.68 of the Dublin Municipal Code, which contains the Inclusionary Zoning Regulations requires purchasers of inclusionary units to execute and record aCouncil-approved form Resale Restriction Agreement with Option to Purchase ("Resale Restriction Agreement"). The City Manager is hereby authorized to cause the Council- approved form Resale Restriction Agreement to be revised to conform to amendments to Chapter 8.68 made by this Ordinance and is further authorized to make non-material revisions to the same. SECTION 5. Effect on Existing Affordable Housing Agreements with Developers. Developers pursuing projects that are subject to existing Affordable Housing Agreements and that contain Inclusionary Units that have not yet been sold may seek an amendment of the existing Affordable Housing Agreement to conform to the changes made by this Ordinance. The City Manager shall execute such amendments provided that are consistent with this Ordinance. Any such amendment may not become effective sooner than the date on which this ordinance becomes effective. SECTION 6. Severability: In the event any section or portion of this ordinance shall be determined invalid or unconstitutional, such section or portion shall be deemed severable and all other sections or portions hereof shall remain in full force and effect. SECTION 7. Savings Clause: All code provisions, ordinances, and parts of ordinances in conflict with the provisions of this chapter are repealed. The provisions of this chapter, insofar as they are substantially the same as existing code provisions relating to the same subject matter shall be construed as restatements and continuations thereof and not as new enactments. With respect, however, to violations, rights accrued, liabilities accrued, or appeals taken, prior to the' effective date of this ordinance, under any chapter, ordinance, or part of an ordinance shall be deemed to remain in full force for the purpose of sustaining any proper suit, action, or other proceedings, with respect to any such violation, right, liability or appeal. SECTION 8. Effective Date and Posting of Ordinance: This ordinance shall take effect and be in force thirty (30) days from and after the date of its passage. The City Clerk of the City of Dublin shall cause the Ordinance to be posted in at least three (3) public places in the City of Dublin in accordance with Section 36933 of the Government Code of the State of California. PASSED, APPROVED AND ADOPTED BY the City Council of the City of Dublin, on this 2nd day of December 2008, by the following votes: AYES: NOES: ABSENT: ABSTAIN: 2 of 3 ~ 1~? Mayor ATTEST: City Clerk K: IStnff Reports- PC and CCI20081CCIIZOIOrdIZOAmendfinn110-28-08.DOC 3 of 3 i~ INCLUSIONARY ZONING REGULATIONS Chapter 8.68 CHAPTER 8.68 INCLUSIONARY ZONING REGULATIONS 8.68.010. Purpose. The purpose of this chapter is to: A. enhance the public welfare and assure that further housing development contributes to the attainment of the City's housing goals by increasing the production of residential units affordable by households of very low, low, and moderate income. B. assure that the limited remaining developable land in the City's planning area is utilized in a manner consistent with the City's housing policies and needs. 8.68.020. Definitions. As used in this chapter, each of the following terms shall be defined as follows: A. "Affordable Unit" means an ownership or rental-housing unit, including senior housing, affordable to households with very-low, low, or moderate incomes as defined in this chapter. Rental units are deemed affordable units if the annual rent does not exceed 30% of maximum income level for very-low-, low-, and moderate-income households, adjusted for household size and as defined below. 2. Owner-occupied units are deemed affordable units if the sales price results in annual housing expenses that do not exceed 35% of income level for very-low-, low-, and moderate-income households, adjusted for household size and as defined below. For a very low-income owner- occupied units, the unit shall be deemed an affordable unit if the sales price results in annual housing expenses that do not exceed 35% of the maximum in the very low-income level, adjusted for household size and as defined below. B. "Applicant" means any person, firm, partnership, association, joint venture, corporation, or any entity or combination of entities that seeks city real property development permits or approvals. C. "Dwelling unit" means a dwelling designed and intended for occupancy by one household. D. "Very-low-, low-, and moderate-income levels" means those income and eligibility levels determined periodically by the California Department of Housing and Community Development based on Alameda County median income levels adjusted for family size. Such levels shall be calculated on the basis of gross annual household income considering household size and number of dependents, income of all wage earners, elderly or disabled family members, and all other sources of household income and will be recertified as set forth by local standards, and state and federal housing law. "Very-low income" means 50% or less of the median income, adjusted for actual household size. 2. "Low income" means more than 50% to 80% of the median income, adjusted for actual household size. 3. "Moderate income" means more than 80% to 120% of the median income, adjusted for actual household size. City of Dublin Zoning Ordinance 68-1 September, 1997 Revised March 2005 Attachment 2 ~~i~ INCLUSIONARY ZONING REGULATIONS Chapter 8.68 E. "Resale controls and/or rent restrictions" means legal restrictions by which the affordable units shall be restricted to ensure that the unit remains affordable to very-low-, low-, or moderate-income households, as applicable, for a period of not less than 55 years. With respect to rental units, such rent restrictions shall be in the form of a regulatory agreement recorded against the applicable property. With respect to owner-occupied units, such resale controls shall be in the form of resale restrictions, deeds of trust, and/or other similar documents recorded against the applicable property. F. "Residential development" includes, without limitation, detached single-family dwellings, multiple- dwelling structures, groups of dwellings, condominium or townhouse developments, condominium conversions, cooperative developments, mixed use developments that include housing units, and residential land subdivisions intended to be sold to the general public. 8.68.030. General Requirements A. 12.5% Affordability Requirement. All new residential development projects of 20 units or more designed and intended for permanent occupancy shall construct 12.5% of the total number of dwelling units within the development as affordable units, except as otherwise provided by this chapter. The foregoing requirement shall be applied no more than once to an approved development (and generally at the tentative map stage), regardless of the changes in the character or ownership of the development, provided the total number of units does not change. In applying and calculating the affordability requirement, any decimal fraction less than or equal to 0.50 may be disregarded, and any decimal fraction greater than 0.50 shall be construed as one unit. B. Allocation of Units to Income Levels. Affordable units provided pursuant to this section shall be allocated to households with very-low, low-, and moderate-income levels as follows: Very-low-income households 30% Low-income households 20% Moderate-income households 50% Where the calculation of the allocation results in fewer units that would otherwise be required pursuant to subdivision A above, one additional unit should be allocated to the income level with a decimal fraction closest to 0.50. C. Conditions of Approval: Any tentative map, conditional use permit, or site development review approving residential development projects subject to this chapter shall contain conditions sufficient to ensure compliance with the provisions of this chapter. Such conditions shall detail the number of affordable units required, specify the schedule of construction of affordable units, set forth the applicant's manner of compliance with this chapter, and require the execution of an agreement imposing appropriate resale controls and/or rental restrictions on the affordable units. D. Concurrent Construction. All affordable units in a project or phase of a project shall be constructed concurrently with market-rate units, unless the City Manager determines in writing that extenuating circumstances exist that make concurrent construction infeasible or impractical. E. Design and Distribution of Affordable Units. All affordable units shall reflect the range of numbers of bedrooms provided in the project as a whole and shall not be distinguished by exterior City of Dublin Zoning Ordinance 68-2 September, 1997 Revised March 2005 ~~ ~ ~~ INCLUSIONARY ZONING REGULATIONS Chapter 8.68 design, construction, or materials. Affordable units may be of smaller size than the units in the project and may have fewer amenities than the market rate units in the project. All affordable units shall be reasonably dispersed throughout the project. 8.68.040. Exceptions to 12.5% Affordability Requirement. Developers of projects subject to 8.68.030A shall construct 12.5% of the total number of dwelling units within the development as affordable units, unless subject to an exception set forth in this section. All exceptions require City Council approval, which shall be obtained at or prior to the last discretionary approval for the project. A. Payment of Fees In Lieu of Creation of Affordable Units. Upon request of the applicant, the City Council shall permit the applicant to pay a fee in lieu of constructing up to 40% of the affordable units that the developer would otherwise be required to construct pursuant to Section 8.68.030A. The amount of the fee shall be as set forth in a resolution of the City Council, which may be amended from time to time to reflect inflation and changed conditions in the City and the region. In lieu fees shall be paid at the time and in the amount set forth in the in lieu fee resolution in effect at the time of issuance of the building permit. B. Off-Site Projects. An applicant may construct the affordable units not physically within the development in lieu of constructing some or all of the affordable units within the development, with the approval of the City Council, if the City Council finds: 1. that construction of the units off-site in lieu of constructing units on-site is consistent with the chapter's goal of creating, preserving, maintaining, and protecting housing for very low-, low- and moderate-income households. 2. that the units to be constructed'off site are consistent with Section 8.68.030E above. 3. that it would be infeasible or impractical to construct affordable units on-site. 4. that conditions of approval for the project require that the off-site affordable units would be governed by the terms of a deed restriction and, if applicable, rental restrictions similar to that used for the on-site affordable units. 5. that the conditions of approval for the project, or other security such as a cash deposit, bond, or letter of credit, are adequate to require the construction of the off-site affordable units concurrently with the completion of the construction of the residential development or within a reasonable period (not to exceed 5 years). C. Land Dedication. An applicant may dedicate land to the City or city-designated local non-profit housing developer in lieu of construction of some or all of the required affordable units, if the Council finds that: that dedication of land in lieu of constructing units is consistent with the chapter's goal of creating, preserving, maintaining, and protecting housing for very-low, low- and moderate- income households. 2. that the dedicated land is useable for its intended purpose, is free of toxic substances and contaminated soils, and is fully improved, with infrastructure, adjacent utilities, grading, and all development-impact fees paid excluding any inclusionary zoning ordinance fees. City of Dublin Zoning Ordinance 68-3 September, 1997 Revised March 2005 ~~ INCLUSIONARY ZONING REGULATIONS Chapter 8.68 3. that the proposed land dedication is of sufficient size to meet the following requirements: a. the dedication includes land sufficient to construct the number of units that the applicant would otherwise be required to construct by Section 8.68.030.A, based on the size of lots in the subdivision for which the applicant is meeting its obligation; and b. in addition, the dedication includes such additional land the market value for which is equal to or exceeds the difference between the value of a market-rate, 1200-square foot unit and the price at which such a unit could be sold as an Affordable Unit (which amount shall be set forth in a resolution adopted from time to time by the City Council) times the number of units required. D. Credit transfers. An applicant may fully or partially satisfy the requirements of Section 8.68.030A through the use of transfer credits created pursuant to Section 8.68.060. Credit certificates shall be presented to the Community Development Director, who shall note at the time of project approval the credit certificate by number. Credit certificates may only be used to satisfy the requirements for Inclusionary Units for the income category (i.e., very low, low, or moderate) and number of bedrooms for which they are issued. E. Waiver of Requirements. The City Council, at its discretion, may waive, wholly or partially, the requirements of this ordinance and approve alternate methods of compliance with this Chapter if the applicant demonstrates, and the City Council finds, that such alternate methods meet the purposes of this Chapter. 8.68.050. General Procedures for Implementing Inclusionary Zoning Requirements A. Agreements. Prior to the issuance of a building permit for an affordable unit, resale restrictions or rental controls, or both, as the case may be, shall be set forth in an agreement between the City and the developer, in a form consistent with the City Council-adopted form agreement, which agreement shall be recorded against the property containing the affordable units. The agreement shall be executed by the City Manager, and its requirements shall run with the land and bind the applicant's successors. B. Rental Units; Occupancy; Annual Report. Agreements involving rental units shall require the owner of the affordable units to ensure that the units are occupied by tenants whose monthly income levels do not exceed very low-, low-,or moderate income levels, as the case may be, and shall preclude tenants from subletting or subleasing the unit. The agreement shall also require the owner of the affordable unit to submit an annual report to the City Manager, in a format approved by the City. The report shall include, but not be limited to the following information: an identification of the affordable units within the project; the monthly rents charged and proposed to be charged; vacancy information for the prior year; and the monthly income for tenants of each affordable unit throughout the prior year. C. Ownership Units; Occupancy; City's Right of First Refusal. Agreements for ownership units shall specify that the inclusionary units must be occupied by the owner or owners and may not be leased or rented without the written approval of the City. The resale restrictions shall provide that in the event of the sale of an affordable unit, the City shall have the right to purchase any affordable owner-occupant unit at the maximum price that could be charged to an eligible household. City of Dublin Zoning Ordinance 68-4 September, 1997 Revised March 2005 $'~• ~ f INCLUSIONARY ZONING REGULATIONS Chapter 8.68 D. Selection Criteria. No household shall be permitted to occupy a unit that is required under this chapter to be affordable unless the City or its designee has approved the household's eligibility. Eligible potential occupants of affordable units will be qualified on the basis of household income, the median combined household income statistics for Alameda County published periodically by the California Department of Housing and Community Development, all sources of household income and assets, the relationship between household size and the size of available units, and any further criteria required by law. The developer shall use an equitable selection method established in conformance with the terms of this chapter. The selection criteria may not distinguish between adults and children. Selection of qualified person should be based on priorities established using the point system described below: • Employed within the boundaries of the City of Dublin (3 points, one per household) • Public Service employee working in the City of Dublin (1 additional point) • Dublin resident (3 points, one per household) • Seniors (1 point, one per household) • Permanently disabled (1 point, one per household) • Immediate family member of Dublin resident (1 point, one per household) • Required to relocate from current Dublin residence due to demolition of dwelling or conversion of dwelling from rental to for-sale unit (1 point, one per household) To qualify as a "Public Service Employee", the person shall be employed by a Public Agency. To qualify as "Employed within the boundaries of the City of Dublin", the person shall have been employed within the City of Dublin for at least six months. To qualify as a "Dublin resident," the person shall have been a resident of the City of Dublin for at least aone-year period prior to the eligibility determination. 8.68.060. Affordable Unit Credits. A. Creation. Affordable unit credits may be created by the City Council. One affordable unit credit certificate shall be issued for each affordable unit constructed in excess of the number of affordable units required to be constructed for the project by Section 8.68.030A. The certificate shall designate a specific income category (i.e., very-low, low, or moderate income) and number of bedrooms for which they are issued. B. Ownership and use of credits. Affordable unit credit certificates are issued to and become the possession of the project owner, who may then use them to satisfy the requirements of this chapter for another project in the City. If a project owner proposes to sell credit certificates, the parties shall first obtain the consent of the Community Development Director, who will document the transfer by certificate number. City of Dublin Zoning Ordinance 68-5 September, 1997 Revised March 2005 ~ ~~~ INCLUSIONARY ZONING REGULATIONS Chapter 8.68 8.68.070. Incentives to Encourage On-Site Construction of Affordable Units. The City may, but shall not be required to, offer incentives or financial assistance to encourage the on-site construction of affordable units in excess of 12.5% of the total number of units in the project to the extent resources for this purpose are available and approved for such use by the City Council or City Manager. Such incentives may include, but shall not be limited to, the following: A. Fee Deferral. Development Processing Fees. The City Manager may approve deferred payment of City processing fees applicable to the review and processing of the project. The terms and payment schedule of the deferred fees shall be subject to the approval of the City Manager. 2. Development Impact Fees. The City Council may authorize the deferred payment of development impact fees applicable to the affordable units. Approval of this incentive requires demonstration by the Applicant that the deferral increases the project's feasibility. The applicant must provide appropriate security to ensure future payment of such fees. B. Design Modifications. The City Council may approve design modifications to affordable units that increase the feasibility of the construction of affordable units, including but not limited to, the following: Reduced lot size. 2. Reduced setback requirements. 3. Reduced open space requirements. 4. Reduced landscaping requirements. 5. Reduced interior or exterior amenities. 6. Reduction in parking requirements. 7. Height restriction waivers. 8.68.080. Inclusionary Zoning In Lieu Fee Fund. In Lieu Fees shall be deposited into a fund known as the "Inclusionary Zoning In Lieu Fees Fund" ("Fund"). A. Use. All monies in the Fund, together with any interest earnings on such monies less reasonable administrative charges, shall be used or committed to use by the City for the purpose of providing very-low, low-, and moderate-income ownership or rental housing in the City of Dublin. B. Annual report. The City Manager shall prepare an annual report to the City Council identifying the balance of monies in the Fund and the affordable units provided and any monies committed to providing very-low-, low-, and moderate-income housing. The annual report shall also include a review of administrative charges. 8.68.090. Violations. It shall be unlawful for any person, firm, corporation, partnership or other entity that is subject to this ordinance pursuant to section 8.68.030A to violate any provision or to fail to City of Dublin Zoning Ordinance 68-6 September, 1997 Revised March 2005 ion n INCLUSIONARY ZONING REGULATIONS Chapter 8.68 comply with any of the requirements of this chapter. A violation of any of the provisions or failing to comply with any of the requirements of this Chapter shall constitute a misdemeanor; except that notwithstanding any other provisions of this Code, any such violation constituting a misdemeanor under this chapter, may in the discretion of the enforcing authority, be charged and prosecuted as an infraction. Any person convicted of an infraction under the provisions of this Code shall be punishable as provided by the Government Code of the State of California. 8.68.100. Enforcement. A. General. The City Manager shall enforce this chapter, and its provisions shall be binding on all agents, successors, and assigns of an applicant. The City Manager may suspend or revoke any building permit or approval upon finding a violation of any provision of this chapter. No land-use approval, building permit, or certificate of occupancy shall be issued for any residential development unless exempt from or in compliance with this chapter. The City may institute any appropriate legal actions or proceedings necessary to ensure compliance herewith, including, but not limited to, actions to revoke, deny, or suspend any permit or development approval. B. Excessive rents/legal action. If the City Manager determines that rents in excess of those allowed by operation of this chapter have been charged to a tenant residing in an affordable unit, the City may take appropriate legal action to recover, and the project owner shall be obligated to pay to the tenant, or to the City in the event the tenant cannot be located, any excess rents charged. 8.68.110. Appeals. Decisions of the City Manager under this Chapter may be appealed as provided in Chapter 8.136. City of Dublin Zoning Ordinance 68-7 September, 1997 Revised March 2005 ~~' ~1 ~~~-~ \~/w CITY CLE~~~~~ File # ~~~ d^-~ 0^ AGENDA STATEMENT CITY COUNCIL MEETING DATE: November 18, 2008 SUBJECT: PUBLIC HEARING: PA OS-041 Amendments to the City of Dublin Inclusionary Zoning Regulations and Layperson's Guide. Report Prepared by John Lucero, Housing Specialist and John Bakker, City Attorney ATTACHMENTS: I) Ordinance Amending-Chapter 8.68 of the Dublin Municipal Code relating to Establishing Fixed Sales Prices for Owner- . Occupied Inclusionary Units; Eliminating the Requirement to Construct Owner-Occupied Very-Low Income Units; and, Altering the For-Sale Inclusionary Unit Income Ratios. 2) Resolution Repealing Resolution No. 94-04 and Approving Guidelines Implementing the Inclusionary Zoning Regulations; Authorizing the City Manager to Subsequently Amend the Guidelines; and, Authorizing the City Manager to Execute Resale Restriction Agreements and all Legal Documents that are consistent with the Council-Approved Guidelines, with the current Layperson's Guide to the Inclusionary Zoning Ordinance Regulations attached as Exhibit A and the proposed Layperson's Guide to the Inclusionary Zoning Ordinance Regulations attached as Exhibit B. 3) Resolution No. 08-35, a Resolution of the Planning Commission of the City of Dublin, Recommending that the City Council Adopt an Ordinance Amending Chapter 8.68 of the Dublin Municipal Code (The Inclusionary Zoning Regulations) Relating to Establishing Fixed Sales Prices For Owner-Occupied Inclusionary Units; Eliminating the Requirement to Construct Owner-Occupied Very-Low- Income Units; and Altering the For-Sale Inclusionary Unit Income Ratios. 4} Chapter 8.68 of the Municipal Code. 5) Sample of the Fixed Sales Price of a Unit. ------------------------------------------------------------------------------------------------------------- COPY TO: Planning Commission Housing Committee Interested Developers Page 1 of 7 v K~\Staff Rennrtc- PC and C'C'\2008\CC\i7.0\I I-18-08CCSR.doc CIi~~nt 3 i2~ ~-, 6) Housing Committee Meeting Draft Minutes dated October , 2008. 7) Planning Commission Meeting Draft Minutes dated October 28, 2008. RECOMMENDATION: 1) Receive Staff presentation; `~ 2) Open the public hearing; 3) Take testimony from the public; 4) Close the public hearing and deliberate; ~ 5) Waive reading and introduce an Ordinance of the City of Dublin Amending Chapter 8.68 of the Dublin Municipal Code (The Inclusionary Zoning Regulations) relating to establishing fixed sales prices for owner-occupied inclusionary units; eliminating the requirements to construct owner-occupied vary-low income units; and, altering the for- sale inclusionary unit income ratios (PA 08-041); and 6) Adopt Resolution Repealing Resolution No. 94-04 and Approving Guidelines Implementing the Inclusionary Zoning Regulations; Authorizing the City Manager to Subsequently Amend the Guidelines; and Authorizing the City Manager to Execute Resale Restriction Agreements and all Legal Documents that are consistent with the Council-Approved Guidelines. FINANCIAL STATEMENT: There would be no additional financial impact for Staff to administer the proposed Amendments to Chapter 8.68, Inclusionary Zoning Regulations. PROJECT DESCRIPTION: Backgrouud On July 9, 1996, the City Council adopted the first version of the Inclusionary Zoning Regulations (Ordinance 14-96). The purpose of the Regulations was to further the City's goal of making available an adequate supply of housing for persons of all economic segments of the community, and contributing to the attainment of this goal by increasing the production of residential units affordable to households of very low-, low-, and moderate-incomes. There was one project approved (Toll Brothers, The Terraces) under this early version of the Regulations. Over the years, there have been modifications to the Regulations which include changes to the amount that developers may pay as in-lieu fees; the required percentage of affordable units a developer must build; the length of time units must remain affordable; and the way the sales price and rent are calculated. On May 21, 2402, the City Council substantially amended the Inclusionary Zoning Regulations which included modifications to Section 8.68.020A, which established criteria on how rents and sales prices were calculated (Attachment 4). Under Section 8.68.020A, the sales prices for owner-occupied Inclusionary Units and rental Inclusionary Units are handled distinctly. With regard to owner-occupied units, the Regulations provide that the prices for moderate- and low-income units are calculated on the individual household's actual income. Each individual household price is calculated for an Inclusionary Unit at a price that would allow an applicant, in the pertinent category, to pay no more than 35% of the household income toward housing expenses (Section 8.68.020.A.2.). The result of the current calculation process is that every Inclusionary Unit sold has a different sales price, with the exception of The Terraces, which were approved under the first Inclusionary Zoning Regulations and has established sales prices. 2 of 7 c ~~,~ Because the prices are based on individual, household income, it was determined that when pricing a ve low-income unit, the maximum income of the low-income category adjusted for household size is used. By contrast, rents for Inclusionary Units are based on the maximum income within the very low-, low-, and moderate-income levels published by the State (Section 8.68.020.A.1). The Regulations state that annual rent for an Inclusionary Unit may not exceed 30% of the maximum income level for very low-, low-, and moderate-income households, adjusted for household size. Proposed Updates Proposal to Calculate Sales Prices of Owner-Occupied Inclusionary Units Based on Fixed Income Levels and Household Sizes. As mentioned above, the procedure used to calculate the maximum sales price for each owner-occupied Inclusionary Unit is determined by assuming that the original. homebuyer will pay no more than 35% of their household income toward their total housing expense, including principal, interest, property taxes, insurance, and homeowner's association dues. In addition, in the calculation it is assumed that the prospective buyer will make a 5% down payment. When the house is resold by the original purchaser, the sales price is not based on the new purchaser's income level. Rather, the sales price is based on the original purchase price plus a percentage increase, if any, set by the State of California Income Limits for that particular year. New purchasers are qualified based on their income, adjusted for household size. As long as their income is below the maximum for the income category, they could be qualified to purchase the home. Based on Staff s experience over the last few years, the guidelines and procedures for calculating the maximum sales price of anowner-occupied Inclusionary Unit should be updated in order to create pricing that will facilitate implementation and monitoring of the Inclusionary Housing Program. Staff proposes to establish set sales prices based on fixed income and household size assumptions within each of the two income-levels (i.e. low and moderate). Staff and the development community have found that establishing an individual sales price for each owner-occupied Inclusionary Unit is time consuming and costly for both the City and the Developer. It also makes it difficult for Developers to market units, since the price of the unit depends on the purchaser's household size and income level. Using afixed- price approach based upon income categories would assist the Developer in creating financial statements that reflect set sales prices instead of an average sales price for each income category and will save time and resources for the City. In moving to this fixed-price approach, Staff proposes to follow the provisions of Section 50052.5 of the Health and Safety Code that apply to California redevelopment agencies. Under this proposed approach, the Units would be priced based on a designated income point that would be affordable to a greater range of households in each applicable income category. Staff proposes the following income points: • For Low-Income Households (household income of between 50% and 80% of .Area Median Income), the sales price would be set at a level so that the total monthly housing payment would not exceed thirty-five percent (35%) of one-twelfth of seventy percent (70%) of the Area Median Income for Alameda County. • For Moderate-Income Households (household income of up to 120% of Area Median Income); the sales price would be set at a level so that total monthly housing payment would not exceed thirty- five percent {35%) of one-twelfth of one hundred and ten percent (110%) of the Area Median Income. 3 of 7 i ~~ ~~ The Area Median Income is the midpoint in the income distribution within a specific geographic area. y definition, 50% of households earn less than the median income, and 50% earn more. The U.S. Department of Housing and Urban Development calculates Area Median Income levels for different communities annually, with adjustments for family size. Area Median Income is used to determine the eligibility of applicants for both federally and locally funded housing programs. The fixed sales price approach would be based upon the number of bedrooms in the home instead of the number of persons in the particular household. For example, if a developer is selling atwo-bedroom unit, the sales price would be calculated under the "number of bedrooms, plus one" rule for the assumed household size. In each case the sales price would be set based upon the following assumed household sizes for the following sizes of residential units: No. of Bedrooms Assumed Household Size 1 2 2 3 3 4 4 5 Thus, atwo-bedroom, moderate-income For-Sale Inclusionary Unit would have a set price calculated using 110% of the Area Median Income for a household of three. In this example, see Attachment 5 for methodology. The fixed sales price of the unit would be $327,307. Proposal to Eliminate Owner Occupied Very-Low Income Units/Proposal to Alter For-Sale Inclusionary Unit Income Ratios The increase in housing ownership in the United States during the late 1990s and early 2000s was largely driven by mortgage lenders relaxing credit standards. Instead of rationing credit based on a homebuyer's ability to meet minimum underwriting standards, lenders began to price for greater risk. In effect, this shifted access to credit from the ability to meet uniform standards to the willingness of borrowers to pay higher interest rates in return for more liberal standards. In the past .year, the mortgage industry has turned from relaxed credit standards to stringent minimum credit standards. Federal Housing Authority insured loans have replaced many of the mortgage products for first time homebuyers. Federal Housing Authority loans and other mortgage loan programs now require a down payment of at least three to five percent. In addition, a majority of mortgage lenders have returned to using a maximum household debt-to-income ratio of between 35%-40% in qualifying households for mortgage loans. Debt-to-income ratios are determined by dividing the household's monthly gross income by the household's total monthly liabilities, including the proposed total monthly housing payment plus all other debt. Very-low-income households often struggle to remain current on mortgage payments and have less money to spend for home maintenance, monthly incidentals, and cost of living expenses. Studies show that more than half of homeowners with incomes under $20,000 did not spend any money on home improvements in the prior 2-year period. Among those with incomes between $20,000 and $40,000, the median amount spent expressed as a share of $1,000 of house value was only 1.0%, but for those with incomes of $40,000 to $60,000 it was 3.2% and over 5% for those earning between $80,000 and $120,000. At the present time, the City has 18 entitled (planning approvals) very low income for sale units. Of these units, 4 have been sold and occupied; 2 are for sale; and, 12 have not yet been built. Because of the current market trends, developers are having difficulty finding very-low-income households that are able 4of7 l~ to qualify for a loan and who meet the requirements of the Inclusionary Zoning Regulations to purc e below market rate home. Very-low-income households typically do not have the required down payment and/or closing costs to purchase a home. The City has seen a few applications from very-low-income applicants, but most have been disqualified because of the inability to meet minimum lender requirements. If households are able to qualify for a loan, it has been typical for households to exhaust all of their financial resources to get into the home, leaving little or no reserves for emergencies or day-to-day expenses that are required to maintain a mortgage and upkeep of a home. After much research on how other jurisdictions handle the requirement to provide housing for very-low- income households, Staff is recommending that the requirement to build .owner-occupied for-sale very- low-income units be eliminated, and the ratio for providing Inclusionary owner-occupied units be updated to require the Developer to provide 60%moderate-income units and 40%low-income units. Staff proposes the following ratios for owner-occupied units: Existing: ^ 50% to moderate-income households ^ 20% to low-income households ^ 30% to very-low-income households Proposed: ^ 60% to moderate-income households ^ 40% for low-income households ^ 0% for very-low income households Ordinances can be changed, and it is important to note that should the market change and new loan products become available, the City Council could revisit this issue in the future. The current ratio for rental properties has not been a problem and appears to be acceptable within the current market. Therefore, Staff is not proposing any changes. The ratios would remain: ^ 50% to moderate-income households ^ 20% to low-income households ^ 30% to very-low-income households Revisions to Layperson's Guide to the Inclusionary Zoning Regulations and other Legal Documents On June 1, 2004, the City Council approved the Layperson 's Guide to the Inclusionary Zoning Ordinance Regulations (The Guide). The purpose of the Guide was to assist the layperson in interpreting the Ordinance: The Guide was designed to assist developers early in the development process so that Residential Development projects are sensitively designed from the beginning in compliance with the requirements of the Inclusionary Zoning Regulations (Exhibit A to Attachment 2). Based on its experience during the last several years implementing the Inclusionary Zoning Program, City Staff has substantially revised the Guide with the result being the Guidelines to the Inclusionary Zoning Ordinance (Exhibit B to Attachment 2), which is presented for City Council consideration and approval. Many of the revisions are editorial. However, the following are the key policy changes and clarifications to the program made by the proposed Guidelines: 5 of 7 I(o~~~ Various clarifications of the requirements for buyers of Below Market Rate Units. These include: o A minimum credit score of 620 (FICO); o A 3% down payment requirement; and o A homebuyer education requirement; o Clarification of the types of acceptable and unacceptable loan products: ^ For instance, 40-year mortgages are permissible, and variable-rate, no-down payment, and negative amortizing loans are impermissible; ' o Adebt-to-income ratio requirement was established; and o Detailed clarification of what constitutes household income for the purposes of qualification. Clarification of how capital improvements are handled. Under certain circumstances a below market rate owner may increase the sales price of the below market rate unit to reflect the cost of capital improvements made to the unit: o The Guidelines include a list of capital improvements for which an owner will or will not be eligible for an increase; o The procedure for obtaining City approval for•Capital Improvements is outlined; and o A cap on the total amount of Capital Improvements eligible for an increase is established. Secondary Below Market Rate Units: o Based on Staff's experience with the Secondary Units in the Positano Project, Staff includes procedures and requirements for below market rate secondary units. In the course of its use of the current version of the Guide and the implementation of the Inclusionary Zoning Regulations, City Staff has found that new issues arise every day and that circumstances change quickly in the residential housing and finance marketplace. Therefore, Staff recommends that the City Manager have the authority to amend the Guidelines to the extent that those amendments are consistent with the purposes of the Inclusionary Zoning Regulations. The resolution approving the Guidelines authorizes the City Manager to make changes to the Guidelines provided that they are consistent with the Inclusionary Zoning Regulations. The Guidelines will become effective once the Ordinance amending the Inclusionary Zoning Regulations becomes effective. October 7, 2008 Development Community Meeting On October 7, 2008, Staff met with members of the development community to go over the proposed modifications to the Inclusionary Regulations and Layperson's Guide. Invitations to the meeting were sent to Dublin's six active developers and their partners. The meeting attendees included Dale Garren with Pinn Brothers, Mike Seeley with DHI Mortgage representing DR Horton, Kerri Boch-Willmes with the Tri-Valley Housing Opportunity Center and Charles McKeag with Citation Homes. All attendees expressed support of Staff's proposals. October 9, 2008 Housing Committee Meeting At the October 9, 2008 Housing Committee meeting, members of the Committee received an informational presentation from Staff regarding the proposed revisions to the Inclusionary Zoning Regulations, and unanimously recommended the Planning Commission review the proposed revisions to Dublin's Inclusionary Zoning Regulation (Attachment 6). October 28, 2008 Planning Commission Meeting At the October 28, 2008 Planning Commission meeting, members of the Commission received an informational presentation from Staff regarding the proposed revisions to the Inclusionary Zoning 6of7 Regulations, and unanimously approved Resolution No. 08-35, recommending that the City Council adopt ~~~~~ an Ordinance amending Chapter 8.68 of the Dublin Municipal Code (The Inclusionary Zoning Regulations) relating to establishing fixed sales prices for owner-occupied Inclusionary Units; eliminating the requirement to construct owner-occupied very-low-income units, altering the For-Sale Inclusionary Unit income ratios. Attached are the Planning Commission Meeting Draft Minutes from October 28, 2008 (Attachment 7). IMPLEMENTATION: The City has adopted several form legal documents such as the Resale Restriction Agreement, Regulatory Agreements for Rental Projects, and standard affordable housing agreements. These documents will be updated to reflect the changes to the Inclusionary Zoning Regulations and the Guidelines. Once the Ordinance becomes effective, Staff will begin using the revised legal documents. Several projects are being constructed presently that may wish to take advantage of the- amendments to the Inclusionary Zoning Regulations. The proposed Ordinance provides that developers of existing projects with unsold Inclusionary Units may seek an amendment to their affordable housing agreements to allow them conform to the amended Ordinance and that the City Manager may execute such an amendment. ENVIRONMENTAL REVIEW: The proposed update to the Inclusionary Zoning Regulations is exempt from the California Environmental Quality Act based on the following findings: The Inclusionary Zoning Regulations are not a "project" within the meaning of Section 15378 of the State California Environmental Quality Act Guidelines, because it has no potential for resulting iri physical change in the environment, directly or ultimately. The proposed Regulations do not, in itself, allow the construction of any building or structure. CONCLUSION: After several years of administering the Inclusionary Zoning Regulations, it has become necessary to update the Regulations to provide easier implementation by both the development community and City Staff. In addition, the update addresses difficulties in the marketing and sale ofvery-low-income units. In addition, Staff recommends that the City Council adopt a Resolution approving the Guidelines and authorizing the City Manager to amend from time to time the Guidelines and all other legal documents implementing the Inclusionary Zoning Ordinance provided that such amendments are consistent with the Inclusionary Zoning Regulations (Attachment 2). RECOMMENDATION: Staff recommends that the City Council: 1) Receive Staff presentation; 2) Open the public hearing; 3) Take testimony from the public; 4) Close the public hearing and deliberate; 5) Waive reading and introduce an Ordinance of the City of Dublin Amending Chapter 8.68 of the Dublin Municipal Code (The Inclusionary Zoning Regulations) relating to establishing fixed sales prices for owner-occupied inclusionary units; eliminating the requirements to construct owner-occupied vary-low income units; and, altering the for-sale inclusionary unit income ratios (PA 08-041); and 6) Adopt Resolution Repealing Resolution No. 94-04 and Approving Guidelines Implementing the Inclusionary Zoning Regulations; Authorizing the City Manager to Subsequently Amend the Guidelines; and, Authorizing the City Manager to Execute Resale Restriction Agreements and all Legal Documents that are consistent with the Council- Approved Guidelines. 7 of 7