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HomeMy WebLinkAbout75B - PH - ZONING ORDN AMENDMENTREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: NOVEMBER 7, 2011 TITLE: PUBLIC HEARING - ZONING ORDINANCE AMENDMENT NO.2011-01 TO CREATE A HOUSING OPPORTUNITY ORDINANCE • j UJ, CITY MANAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Ordinance on 1" Reading ? Ordinance on 2nd Reading ? Implementing Resolution ? Set Public Hearing For CONTINUED TO FILE NUMBER Adopt an ordinance approving Zoning Ordinance Amendment No. 2011-01. PLANNING COMMISSION ACTION On September 26, 2011, the Planning Commission recommended that the City Council adopt an ordinance approving Zoning Ordinance Amendment No. 2011-01 by a vote of 7:0 to amend the zoning code to create a Housing Opportunity Ordinance to ensure future residential development projects contribute to the attainment of the affordable housing goals set forth in the Housing Element of the City's General Plan. The Planning Commission made no changes to the modifications outlined in the attached staff report (Exhibit A). With its recommendation of approval, the Planning Commission directed staff to provide the Council with copies of the sample fee calculation worksheets (Exhibit B). These sample worksheets were provided by the city consultant utilizing existing residential developments within the city. FISCAL IMPACT There is no fiscal impact associated with this action. y y . Trevino E utive Director Planning & Building Agency SK:rb sk\wp51\reports\Z0A11-01 Housing Ordinance= Exhibit: A. Planning Commission Staff Report B. Sample Fee Calculation Worksheets 75B-1 75B-2 REQUEST FOR Planning Commission Action PLANNING COMMISSION MEETING DATE: SEPTEMBER 26, 2011 TITLE: PUBLIC HEARING -ZONING ORDINANCE AMENDMENT NO. 2011-01 TO CREATE A HOUSING OPPORTUNITY ORDINANCE Prepared by Sergio Klotz C?? Executive Director RECOMMENDED ACTION PLANNING COMMISSION SECRETARY APPROVED ? As Recommended ? As Amended ? Set Public Hearing For DENIED ? Applicant's Request ? Staff Recommendation CONTINUED TO 6L.A. 0 .t Planning Ma ger Recommend that the Planning Commission recommend that the City Council adopt an ordinance approving Zoning Ordinance Amendment No. 2011-01. Request of Applicant The City of Santa Ana is initiating a request to create a Housing Opportunity Ordinance to ensure that future residential development projects contribute to the attainment of the affordable housing goals set forth in the Housing Element of the City's General Plan. Project Description The Housing Element of the General Plan identifies the long range plans for housing throughout the city. The Element further identifies a vision, goals, policies and programs to address housing issues within the city. The Housing Opportunity Ordinance helps to implement a component of the Housing Element by playing an active role in the provision of affordable housing within the City of Santa Ana. Proiect Background Each city in California is required to adopt and implement a Housing Element as part of its General Plan. The Housing Element must be updated every eight years and it must establish goals and policies to ensure that regional housing needs can be met. Chief among satisfying future housing projections is the need to provide for housing that is affordable to people who make less than, or only slightly more than, the county median income. Housing that meets this criteria is referred to as "affordable housing." The current median income for a family of four in Orange County is $87,200. While the City is not required to build affordable housing, it must show that adequate development sites are available for the production of such housing and it must show evidence of policies that support the production of affordable housing. Exhibit A 75B-3 i Zoning Ordinance Amendment No. 2011-01 September 26, 2011 Page 2 The State establishes target housing production goals for each city through the Regional Housing Needs Assessment or RHNA. For the 2006-2014 planning period the City of Santa Ana's RHNA target is 3,393 units. This number is based on regional population growth estimates of which each city is allotted a portion. In addition, the State establishes the number of units within a range of income categories that must be provided. For Santa Ana 1,932 of the 3,393 units should be constructed within the moderate, low, very low and extremely low income categories. The proposed ordinance is intended to assist the City in meeting a portion of the RHNA requirement. The following table details this requirement. Santa Ana RHNA Targets for Affordable Housing - 2006-2014 Income Level 2010 Median Income" 4 person household RHNA Extreme) Low $27,850 347 Very Low $46,450 347 Low $74,300 574 Moderate $104,650 665 Above Moderate Above 1,461 Total 3,393 'Source: Department of Housing and Community Development, 2010 In 2009, the City adopted the General Plan Housing Element for the 2006-2014 update cycle. This updated Housing Element was also certified by the State Department of Housing and Community Development making the City of Santa Ana compliant with State housing law. The Element establishes a policy framework upon which goals and implementation measures are based. The overarching policy statement, as adopted by the City Council, states: "Santa Ana residents have an equal right and opportunity to find suitable housing in quality residential neighborhoods that allow themselves, their families, and neighbors to live the fullest lives. We support an inclusive community that is multigenerational, culturally diverse, sustainable, and economically broad. The City will facilitate the production, rehabilitation, and improvement of rental and homeownership opportunities at different affordability levels." Following from the policy statement the Housing Element then establishes four key issue areas: Housing and Neighborhoods, Housing Supply and Diversity, Housing Assistance, and Special Needs. Each of these key issue areas then has goals and policies in order to implement the Housing Element. The creation of affordable housing is a recurring theme throughout each of these key issue areas and is supported through the policy statements and goals (HE-2.3, HE-2.6, HE-2.8, HE-3.1, HE-3.2, HE-3.3, HE-3.5, HE-3.7, HE-4.1, HE-4.2). Following the establishment of the goals and policies the City must also show specific implementation measures, as well as an estimated time deadline for their completion. The City must also produce an annual report detailing the progress on each of these implementation 75B-4 Zoning Ordinance Amendment No. 2011-01 September 26, 2011 Page 3 measures, which must be submitted to the State Department of Housing and Community Development. Implementation Measure No. 25 of the Housing Element lists a number of Affordable Housing Incentives, including the potential for the establishment of an inclusionary housing ordinance in order to create new affordable housing. Inclusionary housing ordinances are tools used by cities to ensure that a certain percentage of new housing development is available at affordable levels. This requirement can generally be met through the inclusion of such units within the project itself, rehabilitation or construction of units off site, or through the payment of an in-lieu fee. The units have restricted covenants to ensure that they remain affordable over time. Based on a report by the Non-Profit Housing Association, as of 2007 nearly one-third of California jurisdictions had adopted inclusionary housing policies. At the time that the Housing Element was drafted it was recommended that the feasibility of an inclusionary housing ordinance should be studied and implemented within the 2006-2014 framework. State law requires that when new housing is constructed within redevelopment project areas there must also be affordable housing constructed that equals 15 percent of the total number of units constructed within the project area (Health and Safety Code, Section 33413). Due to the fact that significant areas within the Transit Zoning Code formerly zoned as Industrial now have the ability to convert to mixed-use residential development at the property owners' discretion, the potential exists for a substantial number of new units to be constructed within these Overlay Zone areas. As the majority of these areas are located within redevelopment project areas (Central City, Inter City, North Harbor, Bristol and South Main) new residential development would trigger the requirement for new affordable housing development pursuant to state law. If affordable units are not included within the projects themselves, or built by the applicant on another site, the Redevelopment Agency would become responsible for funding and constructing such housing. It is therefore necessary to ensure that the 15 percent affordability requirement be captured within the new development themselves and the Housing Opportunity Ordinance would enable the City to meet this mandate. On June 7, 2010, several months after the adoption of the Housing Element, the City Council adopted the Transit Zoning Code. As part of this action the City Council directed staff to begin a process to draft an inclusionary housing ordinance for those properties within the M1 and M2 Industrial Overlay Zones of the Transit Zoning Code. This direction was given, in part, to address the community's concerns about the provision of affordable housing within re-zoned areas of the Transit Zoning Code, as well as to implement the City's Housing Element and address State Redevelopment Law. Following the adoption of the Transit Zoning Code the City was awarded a Compass Blueprint Grant from the Southern California Association of Governments (SCAG) to study new development opportunities for the Harbor Boulevard Corridor that would improve access to housing served by transit, as well as to further various state and regional sustainability goals. This project also serves to further the Housing Element implementation measure to re-zone 75B-5 Zoning Ordinance Amendment No. 2011-01 September 26, 2011 Page 4 areas to create the opportunity for new housing creation. The outcome of the Harbor Boulevard Corridor Study will also result in the adoption of new zoning that will allow for the construction of housing on property that currently has commercial zoning. Similar to the Transit Zoning Code Industrial Overlay Zones, the Harbor Boulevard corridor identified in the Housing Element is located within a redevelopment project area, North Harbor. The production of new housing in this area would also trigger the 15 percent affordable housing redevelopment requirement. With this in mind, as well as looking to the future, staff recommended that the Housing Opportunity Ordinance be developed on a city-wide basis. The draft ordinance was developed with the input of a variety of stakeholders and interest groups. The draft ordinance, entitled the Housing Opportunity Ordinance, was presented to the City Council during a study session held on January 18, 2011. At that meeting the City Council directed staff to complete the draft document and begin the public hearing adoption process. Proiect Analysis The City of Santa Ana has a wide array of programs that have created affordable housing opportunities throughout the City. These programs include rental assistance, housing rehabilitation and partnerships with developers to create new affordable housing. However, the City has never had a requirement that new market rate housing development contain an affordable component. In past practices, some development projects have been required to pay certain fees to be used toward the provision of affordable housing. These fees, typically referred to as "affordable housing in-lieu fees," were negotiated through development agreements. The absence of an ordinance, such as the one proposed, created uncertainty for both developers and staff with the result that the terms of the development agreement and the establishment of the in- lieu fee were often still being negotiated well into the development review, and even discretionary adoption, process. Further, these fees varied from project to project and were not applied on a consistent basis. The Housing Opportunity Ordinance will provide clear standards as to the City's affordable housing requirements, thereby providing certainty to developers and allowing for the inclusion of the requirement into the initial pro forma and design of the project. The adoption of the ordinance will also ensure that the affordable housing obligation is applied in a consistent and equitable manner. The proposed ordinance applies to proposals for five or more housing units and makes a distinction between those developments going ahead under the "as-of-right" zoning provisions, and those needing a discretionary zoning or general plan amendment. The ordinance will only apply to those developments requesting a zoning amendment from a non-residential to a residential zone (including City-initiated re-zones), an increase in density, a conversion to the residential provision of an overlay zone, or conversion of apartments to condominiums. The rationale behind this approach is that these developments are receiving additional, and often considerable, economic windfall through the development approval process, and the public should recover some part of that benefit and most certainly the public should not be penalized to provide affordable housing when the requirement is caused by a developer's windfall. 75B-6 Zoning Ordinance Amendment No. 2011-01 September 26, 2011 Page 5 Residential Project that propose the creation of five or more residential units through a subdivision, new construction, or conversion from apartment to condominium ownership; it will be subject to the proposed ordinance requirements. The following is a summary of the ordinance: • Fifteen percent of the total number of units must be affordable, whether the project is for sale or rental • Alternatives to meet ordinance o Construct income restricted units on-site o Construct income restricted or substantially rehabilitate units off-site o Under unique circumstances, pay a fee in lieu of construction or rehabilitation • Standards o Disperse units throughout project o Similar number of bedrooms as market-rate units o Comparable design, materials, quality and appearance o Same access to site amenities • Restriction o For sale - 45 years o Rental - 55 years • Submittal of Housing Inclusionary Plan and Housing Agreement The complete draft ordinance is attached as Exhibit 1. Plannina Commission Review On March 14, 2011 the Planning Commission held a Study Session to discuss and provide input on the draft ordinance. Members of the citizen advisory committee were also present at the Study Session to provide their input and comments. On March 28, 2011, the Planning Commission conducted a public hearing to consider the adoption of the Housing Opportunity Ordinance (ZOA 2011-01). During the hearing 10 members of the public provided oral or written testimony regarding the adoption of the proposed ordinance. Their comments ranged from support for the ordinance, to concerns that adequate notice of the public hearing had not been provided and that the ordinance would result in a change to the current zoning of their property. Following the public hearing, the Planning Commission continued the item in order to allow staff time to allow further clarification on the portion of the ordinance related to the calculation of an in-lieu fee, as well as additional public notice. 75B-7 Zoning Ordinance Amendment No. 2011-01 Septerber 26, 2011 Page 6 During the Planning Commission's May 9, 2011 meeting Chairman Alderete appointed an Ad Hoc Committee consisting of himself and Commissioners Acosta and Turner to further review the ordinance. The Planning Commission continued the Housing Opportunity Ordinance on August 22, 2011 to the Commission meeting on September 12, 2011 and then to the meeting of September 26, 2011 at the request of staff. Plannina Commission Ad Hoc Committee The Planning Commission Ad Hoc Committee held two meetings (June 7 and 30, 2011) to discuss in detail the proposed ordinance. The primary areas of discussion topics centered on the methodology used to calculate any potential in-lieu fee, the contents of the Administrative Procedures manual and the specifics of the allowance for off-site rehabilitation as a means to satisfy the inclusionary housing requirement. Kathe Head, the City's consultant from Keyser Marston Associates, provided information on her experience in developing and administering inclusionary housing ordinances throughout the State. In response to the Commissioners' questions and concerns regarding a "fixed fee" approach versus a "market conditions" approach, or some combination thereof, Ms. Head clarified that the approach contained in the proposed ordinance would not establish a fixed fee, but would instead be responsive to market conditions at the time of the application. The Committee also discussed the provision contained in the Ordinance that allows an applicant to provide for the required affordable units off-site through the substantial rehabilitation of existing units, such as an existing apartment building. Clarification has been added to the ordinance that would ensure that the number of units to be rehabilitated off-site matches the affordability gap associated with the provision of on-site units. Policy Considerations for the Fixed Fee vs. the Market Conditions Approach The primary goal of the Housing Opportunity Ordinance is to achieve production of units within development projects. This ensures that the City is able to show progress towards its Regional Housing Needs Assessment (RHNA) targets, as well as ensuring that projects have mixed-income units, rather than clumping affordable units all together in separate projects. However, where it can be clearly demonstrated that production of such units within a project is not feasible, the ordinance includes a provision whereby a developer may request that the City Council allow them to pay a fee in lieu of providing the required affordable units. Upon consideration of the applicant's request, the Council may either approve or deny the ability to pay the in-lieu fee. The fee itself would be determined by a set methodology. It is important to note, however, that accepting in-lieu fees is a last resort. The overarching goal is to produce affordable housing units in a mixed income setting, rather than stand-alone affordable projects. 75B-8 Zoning Ordinance Amendment No. 2011-01 September 26, 2011 Page 7 Even though collecting an in-lieu fee should be a rare occurrence, the proposed ordinance establishes a methodology for calculating the fee that is based on bridging the gap between what it would cost to provide the unit at a market rate versus an affordable rate. The calculation uses market rents or for-sale prices in place at the time of application to establish the cost of the unit. It then uses current affordability indexes established by the State and County to determine what a prospective owner or tenant could pay. The difference between the rent/sale price and the amount the owner/tenant could pay constitutes the affordability gap. There are generally two ways of calculating an affordable housing in-lieu fee - a fixed fee or a market-based fee. A fixed fee is established based on a variety of criteria, which could include unit size, number of bedrooms and/or geographic location within a city. The fee is then set and remains fixed until such time as the City Council takes action to adjust it. It could also be adjusted based on common factors, such as the Consumer Price Index. The advantage of this approach is that the fee is slightly easier to calculate. The disadvantage of this approach is that the fee does not respond to current market conditions and, as such, may not accurately reflect the actual cost gap of providing the affordable unit. If a fixed fee were established today, the current housing market conditions, where market prices are very close to affordable prices in some income categories, would result in a fee that is very low to reflect the relatively small affordability gap. Given that new housing production of the type that would trigger this ordinance is unlikely to occur in the near term, any fixed fee established today would be out of date before an application is received. This could have the effect of creating additional financial responsibility for the city to provide the unit in the future. In addition, differences in housing prices within a jurisdiction could further skew the fee. In a large built-out city such as Santa Ana, where there is a wide range of housing prices, a fixed fee could be disproportionately charged unless it was adjusted for the geographic location of the project. This adjustment would still not account for shifts in market conditions over time. A market-based fee responds to market conditions at the time of application. While the fee itself is not fixed, the methodology used to calculate the fee does not change and it is not overly difficult to calculate. For those jurisdictions in California that have adopted ordinances requiring new housing developments to provide affordable units, the fixed fee approach is the most common. However, two-thirds of cities in California do not have formally adopted ordinances requiring affordable housing. The most common practice in these jurisdictions is to negotiate fees at the time of application without any formal methodology, or to not require any affordable units. Negotiating fees without a fixed methodology creates uncertainty for the developer and does not allow the city to apply the in-lieu fee equally on all development projects. The advantage of using a market based methodology is that it uses current for-sale and lease rates, as well as the current affordable income indexes in place at the time of application. This ensures that any fee charged at that time of application would not penalize or, conversely, create a windfall, for those developers seeking to pay the fee in lieu of unit production. It would also ensure that affordability rates were also accurately reflected. 75B-9 Zoning Ordinance Amendment No. 2011-01 September 26, 2011 Page 8 The disadvantage to using the market based approach is that it requires developers to provide more information to the city regarding anticipated sales prices or lease rates. However, given that the developer would be requesting a deviation from the requirement to provide the housing as part of the project, and must also show financial justification as to why it would be infeasible to do so, the provision of the project's economic information would be required in any case. Upon careful review of all of the policy implications of the fixed fee vs. the market based methodology, staff recommends the approach contained in the proposed ordinance of a market based methodology. Community Redevelopment and Housing Commission On April 5, 2011, staff presented the Housing Opportunity Ordinance to the Community Redevelopment and Housing Commission. The item allowed staff to walk the Commission through the ordinance and answer questions. The Commission approved the recommendation to receive and file. Public Outreach and Notification During the process of drafting the Housing Opportunity Ordinance an Advisory Committee was established comprised of stakeholders representing a variety of interests including market rate and affordable housing developers, affordable housing advocates, members of the real estate community and property owners within the Transit Zoning Code, as well as the Housing Element's housing opportunity sites. Those participating on the Committee included the following: Lyon Capital Ventures, Building Industry Association-Orange County, Kennedy Commission, CB Richard Ellis, and individual property owners representing the Transit Zoning Code Industrial Overlay, and the Harbor Boulevard and First Street corridors. Two meetings took place on September 16, 2010 and September 30, 2010. In both meetings, staff provided a presentation, updates and discussion with the committee members. The Committee's input played a vital role in drafting the Ordinance. In addition to these meetings, written comments were received from the Building Industry Association, and property owners Michael Madzoeff and Mike Tardif outlining a variety of questions and suggestions. All correspondences were given a written response and many of the suggestions or clarification items resulted in modifications to the proposed ordinance. In addition to the Advisory Committee discussions, staff has had the opportunity to discuss and answer questions at neighborhood and group meetings on the proposed ordinance. Those meetings included one-on-one conversations with individual members of the community at the Harbor Boulevard Community Workshop in December 2010 and the Santa Anita neighborhood meeting in March 2011. On January 18, 2011 a study session was conducted with the City Council to outline the proposed ordinance and process. Staff presented an update on the Housing Element efforts and also discussed the Housing Opportunity Ordinance. On March 14, 2011 a study session was 75B-10 Zoning Ordinance Amendment No. 2011-01 September 26, 2011 Page 9 held with the Planning Commission to discuss the proposed ordinance. Notices were sent to all of the Advisory Committee members notifying them of the study session. At that meeting, two members spoke on the subject, Caesar Covarrubias, Kennedy Commission and Mike Tardif, property owner within the Industrial Overlay of the Transit Zone. Staff also provided a presentation to the Community Redevelopment and Housing Commission on April 5, 2011. Public notification included a mailing list of over 900 property owners and interested parties. This mailing list was used to send notices for the public hearing held on March 28th and this public hearing. This mailing list included: Metro East property owners, Transit Zoning Code Industrial Overlay property owners, Harbor Transit Corridor Plan property owners, First and Fifth Streets Transit Corridor sites property owners, Town and Country Manor property owners, MacArthur Place property owners, City Place property owners and property owners within Harbor Boulevard Corridor project area. Based upon feedback from several property owners regarding the format of the March 28th notice, which was postcard size, staff modified the format for this and all future mailed notifications to a full-page format. This format also conforms to that used by the City Clerk. Spanish and Vietnamese language contact information was also included on these notices. Staff also contacted each of those in attendance at the March 28th public hearing by phone to answer any questions and notify them of this meeting. Notices, a full copy of the draft ordinance and any other handouts or PowerPoint presentations were also posted on the City's website and, where e-mail addresses were provided, staff sent messages to those on the electronic notification list. Notice of this public hearing also was posted on the Planning and Building Agency's Facebook page. A notice was published in the Orange County Reporter advertising the Planning Commission public hearing and notices were mailed to those requesting notification of ordinance amendment proposals, such as Santa Ana Unified School District and Edison Real Estate Operations. At the time of publishing this report, a total of nine telephone inquiries were received. The general tone of the inquiries included understanding of the proposed ordinance, possible effect on their current property and why they had received the notice. 75B-11 Zoning Ordinance Amendment No. 2011-01 September 26, 2011 Page 10 Conclusion Based on the analysis provided within this report, staff recommends that the Planning Commission recommend that the City Council adopt an ordinance approving Zoning Ordinance Amendment No. 2011-01. Melanie McCann, AICP Associate Planner SK:jm sklwp511reports\Z0A11-01 Housing Ordinance.9.26.11.pc Attachment: Exhibit 1 - Proposed Housing Opportunity Ordinance 75B-12 APPENDIX A - TABLE 1 AFFORDABLE SALES PRICE CALCULATIONS INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA. CALIFORNIA 1-Bdrm 2-Bdrm 3-Bdrm 4-Bdrm 1. 2010 Orange County Median Income $69,750 $78,500 $87,200 $94,200 II. Moderate Income Sales Prices Household Income @ 110% Median $76,725 $86,350 $95,920 $103,620 Income Allotted to Housing @ 35% of Income $26,854 $30,223 $33,572 $36,267 Ongoing Expenses Maintenance & Insurance $2,700 $3,000 $3,300 $3,600 Utilities ' 1,188 1,368 1,896 2,148 Property Taxes @ 1.1% of Affordable Price 3,183 3,584 3,934 4,231 Total On-going Expenses $7,071 $7,952 $9,130 $9,979 III. Income Available for Mortgage $19,783 $22,271 $24,442 $26,288 Affordable Housing Price Supportable Mortgage @ 6.00% Interest 2 $275,000 $309,600 $339,700 $365,400 Down Payment @ 5% of Affordable Price 14,500 16,300 17,900 19,200 Maximum Affordable Purchase Price $289,500 $325,900 $357,600 $384,600 Based on November 2009 Orange County Housing Authority allowances. Includes: Gas: Cooking, Heating, Water Heater. Electric: Basic trash and sewer. 2 Based on the rate charged for FannieMae 30-year fixed rate fully amortizing loans. Exhibit B Prepared by: Keyser Marston Associates, Inc. File name: SA In-lieu Fee_6_7_11; APP Al 75B-1 3 APPENDIX A - TABLE 2 IN-LIEU FEE CALCULATION WORKSHEET OWNERSHIP PROJECTS -15% MODERATE INCOME INCLUSIONARY REQUIREMENT INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA, CALIFORNIA 1. Project Description A. Project Name B. Project Address II. On-Site Inclusionary Requirement A. Required Number of Inclusionary Units Total Project Units Inclusionary Requirement as % of Total Units Total Inclusionary Requirement (Round-up) B. Inclusionary Unit Distribution Two-bedroom Units Three-bedroom Units Four-bedroom Units Totals Total Building Area (Square Feet) III. Affordability Gap / Unit Calculation Two-bedroom Units Three-bedroom Units Four-bedroom Units IV. Affordabilitv Gap Calculation Two-bedroom Units Three-bedroom Units Four-bedroom Units Total Affordability Gap Total Project Units % of Total Units' Restricted Price - Moderate Income Market Prices 3 $325,900 $357,600 $384,600 Affordability Gap / Unit Inclusionary Units 15% Required # of Inclusionary Units 2 Affordability Gap / Unit Total Affordability Gap Total In-Lieu Fee 4 Per Total Unit Per Income Restricted Unit Per Square Foot of Total Building Area 1 This column must add up to 100%. 2 Multiply the % of Total Units times the Total Inclusionary Requirement. 3 Equal to the lesser of the defined Affordable Sales Price or 20% less than the projected Market Price. 4 The Total In-Lieu Fee is equal to the Total Affordability Gap. Prepared by: Keyser Marston Associates Filename: SA In-lieu Fee_6_7_11; APP A2 75B-1 4 APPENDIX A - TABLE 3-1 IN-LIEU FEE EXAMPLE OWNERSHIP HOUSING EXAMPLE INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA, CALIFORNIA 1. Proiect Description A. Project Name B. Project Address II. On-Site Inclusionary Requirement A. Required Number of Inclusionary Units Total Project Units Inclusionary Requirement as % of Total Units Total Inclusionary Requirement (Round-up) B. Inclusionary Unit Distribution Two-bedroom Units Three-bedroom Units Four-bedroom Units Totals Total Building Area (Square Feet) III. Affordability Gap / Unit Calculation Two-bedroom Units Three-bedroom Units Four-bedroom Units IV. Affordabilitv Gap Calculation Two-bedroom Units Three-bedroom Units Four-bedroom Units Total Affordability Gap Avenue E 2823 West Edinaer Avenue Total Project Units % of Total Units 10 23% 10 23% 24 55% 44 71,478 Market Prices 100% Restricted Price - Moderate Income Units 3 44 15% 7 Required # of Inclusionary Units 2 2 2 3 7 Affordability Gap / Unit $275,000 $220,000 $55,000 $375,000 $300,000 $75,000 $475,000 $380,000 $95,000 Affordability Total Affordability Gap / Unit Inclusionary Units Gap $55,000 2 $110,000 $75,000 2 $150,000 $95,000 3 $285,000 $545,000 Total In-Lieu Fee 4 $545,000 Per Total Unit $12,400 Per Income Restricted Unit $77,900 Per Square Foot of Total Building Area $7.62 ' This column must add up to 100%. 2 Multiply the % of Total Units times the Total Inclusionary Requirement. 3 The restricted prices are set at 20% less than the projected market rate prices for the units. 4 The Total In-Lieu Fee is equal to the Total Affordability Gap. Prepared by: Keyser Marston Associates Filename: SA In-lieu Fee_6_7_11; APP A3-1 75B-15 APPENDIX A - TABLE 3-2 IN-LIEU FEE EXAMPLE OWNERSHIP HOUSING EXAMPLE INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA, CALIFORNIA 1. Project Description A. Project Name B. Project Address II. On-Site Inclusionary Requirement A. Required Number of Inclusionary Units Total Project Units Inclusionary Requirement as % of Total Units Total Inclusionary Requirement (Round-up) B. Inclusionary Unit Distribution Two-bedroom Units Three-bedroom Units Four-bedroom Units Totals Total Building Area (Square Feet) III. Affordability Gap I Unit Calculation Two-bedroom Units Three-bedroom Units Four-bedroom Units IV. Affordabilitv Gap Calculation Two-bedroom Units Three-bedroom Units Four-bedroom Units Total Affordability Gap City Place Memory Lane and Lawson Way 112 15% 17 Required # of Total Project Inclusionary Units % of Total Units' Units 2 23 21% 3 41 37% 6 48 43% 8 112 100% 17 221,400 Restricted Price - Moderate Income Affordability Gap / Market Prices Units 3 Unit $350,000 $280,000 $70,000 $400,000 $320,000 $80,000 $520,000 $385,000 $135,000 Affordability Total Affordability Gap / Unit Inclusionary Units Gap $70,000 3 $210,000 $80,000 6 $480,000 $135,000 8 $1,080,000 $1,770,000 Total In-Lieu Fee 4 $1,770,000 Per Total Unit $15,800 Per Income Restricted Unit $104,100 Per Square Foot of Total Building Area $7.99 This column must add up to 100%. 2 Multiply the % of Total Units times the Total Inclusionary Requirement. The restricted prices for the two- and three-bedroom units are set at 20% less than the projected market rate prices. The 3 restricted price for the four-bedroom units is set at the defined affordable price for a moderate income household. 4 The Total In-Lieu Fee is equal to the Total Affordability Gap. Prepared by: Keyser Marston Associates Filename: SA In-lieu Fee_6_7_11; APP A3-2 75B-1 6 APPENDIX A - TABLE 3-3 IN-LIEU FEE EXAMPLE OWNERSHIP HOUSING EXAMPLE INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA, CALIFORNIA 1. Project Description A. Project Name Canopy Lane B. Project Address Fairview and Alton II. On-Site Inclusionary Requirement A. Required Number of Inclusionary Units Total Project Units 38 Inclusionary Requirement as % of Total Units 15% Total Inclusionary Requirement (Round-up) 6 Required # of Total Project Inclusionary B. Inclusionary Unit Distribution Units % of Total Units' Units 2 Two-bedroom Units 0 0% 0 Three-bedroom Units 11 29% 2 Four-bedroom Units 27 71% 4 Totals 38 100% 6 Total Building Area (Square Feet) 80,899 Restricted Price - Moderate Income Affordability Gap / III. Affordability Gap / Unit Calculation Market Prices Units 3 Unit Two-bedroom Units $0 $0 $0 Three-bedroom Units $500,000 $358,000 $142,000 Four-bedroom Units $600,000 $385,000 $215,000 Affordability Total Affordability IV. Affordability Gap Calculation Gap / Unit Inclusionary Units Gap Two-bedroom Units $0 - $0 Three-bedroom Units $142,000 2 $284,000 Four-bedroom Units $215,000 4 $860,000 Total Affordability Gap $1,144,000 Total In-Lieu Fee 4 $1,144,000 Per Total Unit $30,100 Per Income Restricted Unit $190,700 Per Square Foot of Total Building Area $14.14 This column must add up to 100%. 2 Multiply the % of Total Units times the Total Inclusionary Requirement. 3 The restricted prices are set at the defined affordable sales prices for moderate income households. 4 The Total In-Lieu Fee is equal to the Total Affordability Gap. Prepared by: Keyser Marston Associates Filename: SA In-lieu Fee_6_7_11; APP A3-3 75B-1 7 APPENDIX B - TABLE 1 AFFORDABLE RENT CALCULATIONS INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA, CALIFORNIA Studio 1-Bdrm 2-Bdrm 3-Bdrm 1. 2010 Orange County Median Income II. Very-Low Income Rents Household Income @ 50% Median Income Allotted to Housing @ 30% of Income Maximum Monthly Housing Cost (Less) Monthly Utility Allowance Maximum Very-Low Income Rents III. Low Income Rents Household Income @ 60% Median Income Allotted to Housing @ 30% of Income Maximum Monthly Housing Cost (Less) Monthly Utility Allowance Maximum Low Income Rents $61,050 $69,750 $78,500 $87,200 $30,525 $34,875 $39,250 $43,600 $9,158 $10,463 $11,775 $13,080 $763 $872 $981 $1,090 ' (45) (57) (68) (103) $718 $815 $913 $987 $36,630 $41,850 $47,100 $52,320 $10,989 $12,555 $14,130 $15,696 $916 $1,046 $1,178 $1,308 ' (45) (57) (68) (103) $871 $989 $1,110 $1,205 Based on November 2009 Orange County Housing Authority allowances. Includes: Gas: Cooking, Heating, Water Heater. Electric: Basic 2 Based on 33% of the affordable units at low income and 0% of the affordable units at moderate income. Prepared by: Keyser Marston Associates, Inc. File name: SA In-lieu Fee_6_7_11; APP 131 75B-1 8 APPENDIX B - TABLE 2 IN-LIEU FEE CALCULATION WORKSHEET RENTAL PROJECTS - 5% LOW INCOME & 0% MODERATE INCOME INCLUSIONARY REQUIREMENT INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA, CALIFORNIA 1. Project Description A. Project Name B. Project Address II. On-Site Inclusionary Requirement A. Required Number of Inclusionary Units Total Project Units Inclusionary Requirement as % of Total Units Total Inclusionary Requirement (Round-up) B. Inclusionary Unit Distribution Studio Units One-bedroom Units Two-bedroom Units Three-bedroom Units Totals Total Building Area (Square Feet) C. Inclusionary Unit Income Distribution Studio Units One-bedroom Units Two-bedroom Units Three-bedroom Units Totals III. Rent Assumptions Studio Units One-bedroom Units Two-bedroom Units Three-bedroom Units Total Project Units % of Total Units' Very-Low Income @ 10% Low Income @ 5% Market Rent 1 This column must add up to 100%. 2 Multiply the % of Total Units times the Total Inclusionary Requirement. Very-Low Income $718 $815 $913 $987 15% Required # of Inclusionary Units 2 Total Low Income $718 $815 $913 $987 Prepared by: Keyser Marston Associates Filename: SA In-lieu Fee_6_7_11; APP B2 75B-1 9 Page 2 of 7 APPENDIX B - TABLE 2 IN-LIEU FEE CALCULATION WORKSHEET RENTAL PROJECTS - 5% LOW INCOME & 0% MODERATE INCOME INCLUSIONARY REQUIREMENT INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA, CALIFORNIA IV. Project Value Comparison A. Rent Income Market Rate Units Studio Units One-bedroom Units Two-bedroom Units Three-bedroom Units Very-Low Income Rents Studio Units One-bedroom Units Two-bedroom Units Three-bedroom Units Low Income Rents Studio Units One-bedroom Units Two-bedroom Units Three-bedroom Units Total Rent Income B. Effective Gross Income Total Rent Income (Less) Vacancy Allowance Effective Gross Income (EGI) Project with 100% @ Market Inclusionary Rent Standards Difference C. Operating Expenses (Excluding Debt Service) General Operating Expenses Property Taxes Total Operating Expenses D. Net Operating Income (EGI - Expenses) E. Project Value Net Operating Income Capitalization Rate Total Project Value V Total In-Lieu Fee 3 Per Total Unit Per Income Restricted Unit Per Square Foot of Total Building Area The Total In-Lieu Fee is equal to the difference between the project's value with 100% market rents and the value with the inclusionary housing obligation. Prepared by: Keyser Marston Associates Filename: SA In-lieu Fee_6_7_11; APP B2 75B-20 Page 3 of 7 APPENDIX B - TABLE 3-1 IN-LIEU FEE EXAMPLE RENTAL PROJECT INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA, CALIFORNIA 1. Project Description A. Project Name B. Project Address II. On-Site Inclusionarv Requirement A. Required Number of Inclusionary Units Total Project Units Inclusionary Requirement as % of Total Units Total Inclusionary Requirement (Round-up) B. Inclusionary Unit Distribution One-bedroom Units Two-bedroom Units Totals Total Building Area (Square Feet) C. Inclusionary Unit Income Distribution One-bedroom Units Two-bedroom Units Totals III. Rent Assumptions One-bedroom Units Two-bedroom Units Total Project Units 108 145 Pinnacle MacArthur Boulevard and Main Street % of Total Units' 43% 57% 253 100% 242,208 Very-Low Income @ 10% Low Income @ 5% 11 5 15 7 26 12 Market Rent Very-Low Income $1,330 $815 $1,830 $913 This column must add up to 100%. 2 Multiply the % of Total Units times the Total Inclusionary Requirement. 253 15% 38 Required # of Inclusionary Units 2 16 22 38 Total 16 22 38 Low Income $989 $1,110 Prepared by: Keyser Marston Associates Filename: SA In-lieu Fee_6711; APP 133-1 75B-21 Page 4 of 7 APPENDIX B - TABLE 3-1 IN-LIEU FEE EXAMPLE RENTAL PROJECT INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA, CALIFORNIA IV. Proiect Value Comparison A. Rent Income Market Rate Units One-bedroom Units Two-bedroom Units Very-Low Income Rents One-bedroom Units Two-bedroom Units Low Income Rents One-bedroom Units Two-bedroom Units Total Rent Income B. Effective Gross Income Total Rent Income (Less) Vacancy Allowance Effective Gross Income (EGI) C. Operating Expenses (Excluding Debt Service General Operating Expenses Property Taxes Total Operating Expenses D. Net Operating Income (EGI - Expenses) E. Project Value Net Operating Income Capitalization Rate Total Project Value V Project with 100% @ Market Inclusionary Rent Standards Difference $1,723,680 $1,468,320 3,184,200 2,701,080 107,580 164,340 59,340 93,240 $4,907,880 $4,593,900 $313,980 $4,907,880 $4,593,900 $313,980 (245, 394) (229, 695) (15, 699) $4,662,486 $4,364,205 $298,281 $1,138,500 $1,138,500 $0 546,500 500,900 45,600 ($1,685,000) ($1,639,400) ($45,600) $2,977,486 $2,724,805 $252,681 $2,977,486 $2,724,805 6.0% 6.0% $49,625,000 $45,413,000 $4,212,000 Total In-Lieu Fee 3 $4,212,000 Per Total Unit $16,600 Per Income Restricted Unit $110,800 Per Square Foot of Total Building Area $17.40 3 The Total In-Lieu Fee is equal to the difference between the project's value with 100% market rents and the value with the inclusionary housing obligation. Prepared by: Keyser Marston Associates Filename: SA In-lieu Fee_6_7_11; APP 63-1 7,5B-22 Page 5 of 7 APPENDIX B - TABLE 3-2 IN-LIEU FEE EXAMPLE RENTAL PROJECT INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA, CALIFORNIA 1. Project Description A. Project Name B. Project Address II. On-Site InclusionarV Requirement A. Required Number of Inclusionary Units Total Project Units Inclusionary Requirement as % of Total Units Total Inclusionary Requirement (Round-up) B. Inclusionary Unit Distribution One-bedroom Units Two-bedroom Units Totals Total Building Area (Square Feet) C. Inclusionary Unit Income Distribution One-bedroom Units Two-bedroom Units Totals III. Rent Assumptions One-bedroom Units Two-bedroom Units Skyline Towers East MacArthur Place 350 15% 53 Required # of Total Project Inclusionary Units % of Total Units' Units 2 64 18% 10 286 82% 43 350 100% 53 546,252 Very-Low Income @ 10% Low Income @ 5% Total 7 3 10 29 14 43 36 17 53 Market Rent Very-Low Income Low Income $2,610 $815 $989 $3,570 $913 $1,110 1 This column must add up to 100%. 2 Multiply the % of Total Units times the Total Inclusionary Requirement. Prepared by: Keyser Marston Associates Filename: SA In-lieu Fee_6_7_11; APP 133-2 75B-23 Page 6 of 7 APPENDIX B - TABLE 3-2 IN-LIEU FEE EXAMPLE RENTAL PROJECT INCLUSIONARY HOUSING IN-LIEU FEE METHODOLOGY SANTA ANA. CALIFORNIA IV. Proiect Value Comparison A. Rent Income Market Rate Units One-bedroom Units Two-bedroom Units Very-Low Income Rents One-bedroom Units Two-bedroom Units Low Income Rents One-bedroom Units Two-bedroom Units Total Rent Income B. Effective Gross Income Total Rent Income (Less) Vacancy Allowance Effective Gross Income (EGI) C. Operating Expenses (Excluding Debt Service General Operating Expenses Property Taxes Total Operating Expenses D. Net Operating Income (EGI - Expenses) E. Project Value Net Operating Income Capitalization Rate Total Project Value V Project with 100% @ Market Inclusionary Rent Standards $2,004,480 12,252,240 $1,691,280 10, 410,120 68,460 317,724 Difference 35,604 186,480 $14,256,720 $12,709,668 $1,547,052 $14,256,720 $12,709,668 $1,547,052 (712,836) (635,483) (77,353) $13,543,884 $12,074,185 $1,469,699 $1,575,000 $1,575,000 $0 1,855,000 1,627,500 227,500 ($3,430,000) ($3,202,500) ($227,500) $10,113,884 $8,871,685 $1,242,199 $10,113,884 $8,871,685 6.0% 6.0% $168,565,000 $147,861,000 $20,704,000 Total In-Lieu Fee 3 $20,704,000 Per Total Unit $59,200 Per Income Restricted Unit $390,600 Per Square Foot of Total Building Area $37.90 :i The Total In-Lieu Fee is equal to the difference between the project's value with 100% market rents and the value with the inclusionary housing obligation. Prepared by: Keyser Marston Associates Filename: SA In-lieu Fee_6_7_11; APP 63-2 75B-24 Page 7 of 7 (ROH - 11/07/11) ORDINANCE NO. NS-XXX AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA ANA AMENDING CHAPTER 41 OF THE SANTA ANA MUNICIPAL CODE ADDING HOUSING OPPORTUNITY STANDARDS AND PROCEDURES TO ENCOURAGE THE DEVELOPMENT OF HOUSING THAT IS AFFORDABLE TO A RANGE OF HOUSEHOLDS WITH VARYING INCOME LEVELS THE CITY COUNCIL OF THE CITY OF SANTA ANA DOES ORDAIN AS FOLLOWS: Section 1. The City Council of the City of Santa Ana hereby finds, determines and declares as follows: A. The City of Santa Ana is initiating a request to create a Housing Opportunity Ordinance to ensure that future residential development projects contribute to the attainment of the affordable housing goals set forth in the Housing Element of the City's General Plan. B. The Housing Element of the General Plan identifies the long range plans for housing throughout the city. The Element further identifies a vision, goals, policies and programs to address housing issues within the city. The Housing Opportunity Ordinance helps to implement a component of the Housing Element assisting to play an active role in the provision of affordable housing within the City of Santa Ana. C. Each city in California is required to adopt and implement a Housing Element as part of its General Plan. The Housing Element must be updated every eight years and it must establish goals and policies to ensure that regional housing needs can be met. Chief among satisfying future housing projections is the need to provide for housing that is affordable to people who make less than, or only slightly more than, the county median income. Housing that meets this criteria is referred to "affordable housing." The current median income for a family of four in Orange County is $87,200. While the City is not required to build affordable housing, it must show that adequate development sites are available for the production of such housing and it must show evidence of policies that support the production of affordable housing. 75B-25 D. The State establishes target housing production goals for each city to meet through the Regional Housing Needs Assessment or RHNA. For the 2006-2014 planning period the City of Santa Ana's RHNA target is 3,393 units. This number is based on regional population growth estimates and each city is allotted a portion. In addition, the State establishes the number of units within a range of income categories which must be provided. For Santa Ana 1,932 of the 3,393 units should be constructed within the moderate, low, very low and extremely low income categories. The proposed ordinance is intended to assist the City in meeting a portion of the RHNA requirement. E. In 2009, the City adopted the General Plan Housing Element for the 2006-2014 update cycle. This updated Housing Element was also certified by the State Department of Housing and Community Development making the City of Santa Ana compliant with State housing law. The Element establishes a policy framework upon which goals and implementation measures are based. The overarching policy statement, as adopted by the City Council, states: "Santa Ana residents have an equal right and opportunity to find suitable housing in quality residential neighborhoods that allow themselves, their families, and neighbors to live the fullest lives. We support an inclusive community that is multigenerational, culturally diverse, sustainable, and economically broad. The City will facilitate the production, rehabilitation, and improvement of rental and homeownership opportunities at different affordability levels." F. Following from the policy statement the Housing Element then establishes four key issue areas: Housing and Neighborhoods, Housing Supply and Diversity, Housing Assistance, and Special Needs. Each of these key issue areas then has goals and policies in order to implement the Housing Element. The creation of affordable housing is a recurring theme throughout each of these key issue areas and is supported through the policy statements and goals (HE-2.3, HE-2.6, HE-2.8, HE-3.1, HE-3.2, HE-3.3, HE-3.5, HE-3.7, HE-4.1, HE-4.2). G. Following the establishment of the goals and policies the City must also show specific implementation measures, as well as an estimated time deadline for their completion. The City must also produce an annual report detailing the progress on each of these implementation measures, which must be submitted to the State Department of Housing and Community Development. Implementation Measure No. 25 of the Housing Element lists a number of Affordable Housing Incentives, including the potential for the establishment of an inclusionary housing ordinance in order to Ordinance No. NS-XXX 75B-26 Page 2 of 17 create new affordable housing. Inclusionary housing ordinances are tools used by cities to ensure that a certain percentage of new housing developments are available at affordable levels. This requirement can generally be met through the inclusion of such units within the project itself, rehabilitation or construction of units off site, or through the payment of an in-lieu fee. The units are covenanted to ensure that they remain affordable over time. As of 2007 nearly one-third of California jurisdictions had adopted inclusionary housing programs. At the time that the Housing Element was drafted it was recommended that the feasibility of an inclusionary housing ordinance should be studied and implemented within the 2006-2014 framework. H. On June 7, 2010, several months prior to the adoption of the Housing Element, the City Council adopted the Transit Zoning Code. As part of this action the City Council directed staff to begin a process to draft an inclusionary housing ordinance for those properties within the M1 and M2 Industrial Overlay Zones of the Transit Zoning Code. This direction was given, in part, to address the community's concerns about the provision of affordable housing within re-zoned areas of the Transit Zoning Code, as well as to implement the City's Housing Element and address State Redevelopment Law. State law requires that when new housing is constructed within redevelopment project areas there must also be affordable housing constructed that equals 15% of the total number of units constructed within the project area (Health and Safety Code, Section 33413). Due to the fact that significant areas within the Transit Zoning Code formerly zoned as Industrial now have the ability to convert to mixed-use residential development at the property owners' discretion, the potential exists for a substantial number of new units to be constructed within these Overlay Zone areas. As the majority of these areas are located within redevelopment project areas (Central City, Inter City, North Harbor, Bristol and South Main) new residential development would trigger the requirement for new affordable housing development pursuant to state law. If this new development is not included within the projects themselves, the Redevelopment Agency would be responsible for funding and constructing such housing. The only available funding source for this housing construction would be affordable housing set-aside monies. Given the uncertainty of the availability of these funds over the long term, the burden of the funding of new affordable housing construction could fall to other funding sources, such as the City's general fund. It is therefore necessary to ensure that the 15% affordability requirement be Ordinance No. NS-XXX 75B-27 Page 3 of 17 captured within the new development themselves and the Housing Opportunity Ordinance would enable the City to meet this mandate. J. Following the adoption of the Transit Zoning Code the City was awarded a Compass Blueprint Grant from the Southern California Association of Governments (SCAG) to study new development opportunities for the Harbor Boulevard Corridor that would improve access to housing served by transit, as well as to further various state and regional sustainability goals. This project was also embarked upon in furtherance of the Housing Element implementation measure to re-zone areas to create the opportunity for new housing creation. The Harbor Boulevard Corridor was specifically identified in the Housing Element as an opportunity area due to the availability of large underutilized and sometimes vacant parcels of land and its use as a major transit corridor (Housing Implementation Program 16). The outcome of the Harbor Boulevard Corridor Study will also result in the adoption of new zoning that will allow for the construction of new housing on property that currently has commercial zoning. Similar to the Transit Zoning Code M1 and M2 Industrial Overlay Zones, Harbor Boulevard corridor identified in the Housing Element is located within a redevelopment project area, North Harbor. The production of new housing in this area would also trigger the 15% affordable housing redevelopment requirement. With this in mind, as well as looking to the future, staff recommended that the Housing Opportunity Ordinance be developed on a city-wide basis. K. The draft ordinance was developed with the input of a variety of stakeholders and interest groups. The draft ordinance, entitled the Housing Opportunity Ordinance, was presented to the City Council during a study session held on January 18, 2011. At that meeting the City Council directed staff to complete the draft document and begin the public hearing adoption process. Section 2. Section 41-1900 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Article XIX - Housing Opportunity Ordinance Sec. 41-1900. Purpose This Article establishes standards and procedures to encourage the development of housing that is affordable to a range of households with varying income levels. The purpose of this Article is to encourage the development and availability of affordable housing by requiring the inclusion of affordable housing units within developments that involve an increase in the density otherwise available under Ordinance No. NS-XXX 75B-28 Page 4 of 17 applicable zoning and development standards; a change in land use designation from a zoning regulation that does not permit residential uses to one that does permit residential uses; or the conversion of rental units to condominium ownership. Section 3. Section 41-1901 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Sec. 41-1901. Definitions As used in this Article, the following terms shall have the following meanings: "Adjusted for Household Size Appropriate for the Unit" means a household of one person in the case of a studio unit, two persons in the case of a one-bedroom unit, three persons in the case of a two-bedroom unit, four persons in the case of a three-bedroom unit, and five persons in the case of a four-bedroom unit. "Affordable Housing Cost" means the total housing costs paid by a qualifying household, which shall not exceed the fraction of gross income specified, as follows, in accordance with Sections 50052.5 and 50053 of the Health & Safety Code: Very Low-Income Households. Thirty percent of the income of a household earning 50 percent of the Orange County median income adjusted for family size appropriate for the unit. Low-Income Households. Thirty percent of the income of a household earning 70 percent of the Orange County median income for for-sale units, and 30 percent of the income of a household earning 60 percent of the Orange County median income for rental units, adjusted in either case for family size appropriate for the unit. Moderate Income Households. Thirty-five percent of the income of a household earning 110 percent of the Orange County median income for for- sale units, and 30 percent of the income of a household earning 110 percent of the Orange County median income for rental units, adjusted in either case for family size appropriate for the unit. In the event of a conflict between the fractions specified in this definition and those found in Sections 50052.5 and 50053 of the Health & Safety Code, the fractions specified by State law shall control. "Developer" means any association, corporation, firm, joint venture, partnership, person, or any entity or combination of entities, which seeks City approval for all or part of a Residential Project. Ordinance No. NS-XXX 75B-29 Page 5 of 17 "Executive Director" means the Executive Director of Community Development for the City of Santa Ana. "Inclusionary Housing Agreement" means a legally binding agreement between the Developer and the City, in a form and substance satisfactory to the Executive Director and the City Attorney, and containing those provisions necessary to ensure that the requirements of this Article are satisfied, whether through the provision of Inclusionary Units or through an approved alternative method. "Inclusionary Housing Fund" means the fund created by the City of Santa Ana in which all fees collected in compliance with this Article shall be deposited. "Inclusionary Housing Plan" means the plan submitted by the Developer, in a form specified by the Executive Director, detailing how the provisions of this Article will be implemented for the proposed Residential Project. "Inclusionary Unit" means a dwelling unit that will be offered for sale or rent to low or Moderate-Income Households, at an affordable housing cost, in compliance with this Article. "Low-Income Households" means "lower income households" as that term is defined by Section 50079.5 of the Health & Safety Code. "Low-Income Units, Moderate-Income Units, and Very Low-Income Units" means Inclusionary Units restricted to occupancy by low, moderate, or Very Low-Income Households, respectively, at an affordable housing cost. "Market Rate Units" means dwelling units in a Residential Project that are not Inclusionary Units. "Moderate-Income Households" means "persons and families of low or moderate income" as that term is defined by Section 50093 of the Health & Safety Code. "Administrative Procedures" means those regulations promulgated by the Executive Director pursuant to Section 41-1910 of this Article. "Regulatory Agreement" means an agreement entered into between the City of Santa Ana or the Santa Ana Community Redevelopment Agency and a Developer by which the Developer covenants to keep certain housing units at an affordable housing cost for a specified period of time. "Residential Project" means any of the following: A subdivision resulting in the creation of 5 or more residential lots or residential condominium units; or Ordinance No. NS-XXX 756_30 Page 6 of 17 The new construction of a project consisting of 5 or more multi-family units; or The new construction of 5 or more separate houses or dwelling units; or The conversion of 5 or more rental units to condominium ownership. "Total Housing Costs" the total monthly or annual recurring expenses required of a household to obtain shelter. For a rental unit, total housing costs shall include the monthly rent payment and utilities paid by the tenant (excluding telephone and television). For an ownership unit, total housing costs shall include the mortgage payment (principal and interest), insurance, homeowners' association dues (if applicable), private mortgage insurance (if applicable), taxes, utilities, an allowance for maintenance and any other related assessments. "Very Low-Income Households" means "very low income households" as that term is defined by Section 50105 of the Health & Safety Code. Section 4. Section 41-1902 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Sec. 41-1902. Applicability and Inclusionary Unit Requirements (a) Zone Changes. The requirements of this Article shall apply to any Residential Project located within a zone that has been changed to allow for residential uses where such uses were not previously allowed, or where the zone change allows an increase to the existing residential density permitted by the zoning in place as of the effective date of this ordinance. (b) Applications. The requirements of this Article shall apply to any Residential Project proposed in connection with an application to do any of the following: (1) Increase the permitted residential density of the subject property above the density permitted by applicable zoning at the time of the application. (2) Increase the permitted percentage of residential development allowed for a mixed-use development above the percentage at the time of the application. (3) Convert commercial or industrial land to residential uses; including, but not limited to, the conversion of a hotel to residential use. (4) Approval of an overlay zone site plan permitting residential land uses pursuant to Division 28 of this Chapter. Ordinance No. NS-XXX 75B-31 Page 7 of 17 (5) Convert rental units to condominium ownership. (c) Units for sale. If the Residential Project consists of units for sale, then a minimum of 15-percent of the total number of units in the project shall be sold to Moderate-Income Households, or lower. (d) Rental units. If the Residential Project consists of rental units, then a minimum of 15-percent of the units shall be rented to low or Very Low- Income Households. (e) Allowable credits. The Inclusionary Unit requirements of this Section may be reduced at the discretion of the Executive Director if a greater level of affordability is provided. (f) Rounding of quantities in calculations. In calculating the required number of Inclusionary Units, fractional units shall be rounded-up to the next whole unit. The Developer may choose to pay an in-lieu fee set forth in Section 41- 1904(c) for the fractional units, which shall be calculated based on a percentage of the per unit cost. (g) Displacement of existing Inclusionary Units. Notwithstanding any other provision of this Article, any Residential Project subject to this Article that results in the displacement of Very Low, Low, and/or Moderate Income Household(s) shall be required to provide on-site Inclusionary Units as required by this Article. (h) All Inclusionary Units required by this Article shall be sold or rented in compliance with this Article. Section 5. Section 41-1903 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Sec. 41-1903. Exempt projects The following are exempt from the requirements of this Article: (a) Applications deemed complete. A Residential Project for which a development application has been deemed complete prior to b) Development Agreements. A Residential Project that is the subject of a development agreement under applicable provisions of the California Government Code that expressly provides for an exclusion to this Article or provides for a different amount of Inclusionary Units from that specified by this Article. Ordinance No. NS-XXX 75B-32 Page 8 of 17 (c) Project with Regulatory Agreement. A Residential Project for which a Regulatory Agreement has been approved, provided that the Regulatory Agreement is effective at the time the Residential Project would otherwise be required to comply with the requirements of this Article, and there is no uncured breach of the Regulatory Agreement before issuance of a Certificate of Occupancy for the project. This may include a Residential Project that has obtained a Density Bonus under Article XVI.I of the Santa Ana Municipal Code. Section 6. Section 41-1904 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Sec. 41-1904. Alternatives (a) On site units. The primary means of complying with the inclusionary requirements of this Article shall be the provision of on-site Inclusionary Units in accordance with Section 41-1901, above. A Developer may only satisfy the requirements of this Article by means of an alternative to on-site Inclusionary Units in accordance with the requirements and procedures of this Section. (b) Off-site units. Upon application by the Developer and at the discretion of the City Council, the Developer may satisfy the Inclusionary Unit requirements for the project, in whole or in part, by substantially rehabilitating existing rental units. For purposes of providing off-site units, substantially rehabilitating means rehabilitating a dwelling unit that has substantial building and other code violations, and has been vacant for at least 90 days, such that the unit is returned to the City's housing supply as decent, safe and sanitary housing, and the cost of the work exceeds twenty-five percent of the market value of the unit after rehabilitation. The number of substantially rehabilitated units that will be required under the off-site unit provision will be determined based on a calculation of the affordability gap associated with on-site provision of the units. This affordability gap will then be translated into the number of off-site units that can be produced at a financial gap equal to the affordability gap associated with on-site provision of the units. (c) In-lieu fee. (1) 20 or fewer units. In the case of a Residential Project containing between 5 and 20 residential lots or residential units, the Developer may elect to satisfy the Inclusionary Unit requirements for the project, in whole or in part, by payment of a fee in lieu of constructing some or all of the required units. Ordinance No. NS-XXX 758-33 Page 9 of 17 (2) More than 20 units. In the case of a Residential Project comprised of more than 20 residential lots or residential units, the Developer may apply to pay a fee in lieu of constructing some or all of the required units, and such application shall be subject to the review and approval of the City Council, which may grant such the Developer's request if substantial evidence supports a finding that the cost of providing Inclusionary Units on-site would substantially exceed the amount of the applicable in-lieu fee. (3) Calculation of fee. The amount of the fees allowed by this Section shall be calculated in accordance with the methodology to be set forth in the Administrative Procedures. The calculation methodology is based on the affordability gap associated with fulfilling the required affordable housing units on site within the proposed Residential Project. (4) Timing of payment. The Developer shall pay any in-lieu fees allowed by this Section in full before issuance of a Building Permit for any portion of the Residential Project, including any non-residential portions of a mixed-use development. (5) Inclusionary Housing Fund. Fees collected in compliance with this Section shall be deposited in the Inclusionary Housing Fund. Section 7. Section 41-1905 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Sec. 41-1905. Housing Plan and Housing Agreement (a) Submittal and execution. The Developer shall comply with the following requirements. (1) Inclusionary Housing Plan. The Developer shall submit an Inclusionary Housing Plan, in a form specified by the Executive Director, detailing how the provisions of this Article will be implemented for the proposed Residential Project. If the inclusionary housing plan includes alternatives to on-site units that require the approval of the City Council, then the Inclusionary Housing Plan shall be subject to the review and approval of the City Council. All other Inclusionary Housing Plans shall be subject to the approval of the Executive Director, subject to appeal to the City Council. Any such appeal shall be filed within fifteen (15) days of the decision of the Executive Director. (2) Inclusionary Housing Agreement. The Developer shall execute and cause to be recorded an Inclusionary Housing Agreement. The Ordinance No. NS-XXX 75B-34 Page 10 of 17 Inclusionary Housing Agreement shall be a legally binding agreement between the Developer and the City, in a form and substance satisfactory to the Executive Director and the City Attorney, and containing those provisions necessary to ensure that the requirements of this Article are satisfied, whether through the provision of Inclusionary Units or through an approved alternative method. (b) Discretionary approvals. No discretionary approval shall be issued for a Residential Project subject to this Article until the Developer has submitted an Inclusionary Housing Plan. (c) Issuance of Building Permit. No Building Permit shall be issued for a Residential Project subject to this Article unless the Executive Director has approved the Inclusionary Housing Plan, and any required inclusionary Housing Agreement has been recorded. (d) Issuance of Certificate of Occupancy. A Certificate of Occupancy shall not be issued for a Residential Project subject to this Article unless the approved Inclusionary Housing Plan has been fully implemented. Section 8. Section 41-1906 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Sec. 41-1906. Standards (a) Location within project, relationship to non-Inclusionary Units. All Inclusionary Units shall be: (1) Reasonably dispersed throughout the Residential Project; (2) Proportional, in number of bedrooms, and location, to the market rate units; (3) Comparable to the market rate units included in the Residential Project in terms of design, materials, finished quality, and appearance; and (4) Permitted the same access to project amenities and recreational facilities, as are market rate units. (b) Timing of construction. All Inclusionary Units in a Residential Project shall be constructed concurrent with, or before the construction of the market rate units. If the City approves a phased project, a proportional share of the required Inclusionary Units shall be provided within each phase of the Residential Project. Ordinance No. NS-XXX 758-35 Page 11 of 17 (c) (d) Units for sale. (1) Time limit for inclusionary restrictions. A unit for sale shall be restricted to the target income level group at the applicable affordable housing cost for a minimum of 45 years. (2) Certification of purchasers. The Developer and all subsequent owners of an Inclusionary Unit offered for sale shall certify, on a form provided by the City, the income of the purchaser. (3) Resale price control. In order to maintain the availability of inclusionary units required by this Article, the resale price of an owner occupied Inclusionary Unit shall be limited to the lesser of the fair market value of the unit as established by a licensed real estate agent based upon three comparable properties or the restricted resale price. For these purposes, the restricted resale price shall be the applicable Affordable Housing Cost. (4) Inheritance of Inclusionary Units. Upon the death of an owner of an owner-occupied Inclusionary Unit, title in the property may transfer to the surviving joint tenant or heir (in the case of the death of a sole owner or all owners of the household.) (5) Forfeiture. If an Inclusionary Unit for sale is sold for an amount in excess of the resale price controls required by this Section, the buyer and the seller shall be jointly and severally liable to the City for the entire purchase price of the unit. Recovered funds shall be deposited into the Inclusionary Housing Fund. Notwithstanding the foregoing, it shall be within the discretion of the Executive Director to allow the buyer and seller to cure any violation of the resale price controls within 180 days. Rental units. (1) Time limit for inclusionary restrictions. A rental unit shall remain restricted to the target income level group at the applicable affordable housing cost for 55 years. (2) Certification of renters. The owner of any rental Inclusionary Units shall certify, on a form provided by the City, the income of all members of the household above the age of 18 at the time of the initial rental and annually thereafter. (3) Forfeiture. Any lessor who leases an Inclusionary Unit in violation of this Article shall be required to forfeit to the City all money so Ordinance No. NS-XXX 758-36 Page 12 of 17 obtained. Recovered funds shall be deposited into the Inclusionary Housing Fund. (e) The Executive Director may require the execution and recording of whatever documents are required to ensure enforcement of this Section; including but not limited to promissory notes, deeds of trust, resale restrictions, rights of first refusal, options to purchase, and/or other documents, which shall be recorded against all Inclusionary Units. (f) General Prohibitions. (1) No person shall sell or rent an Inclusionary Unit at a price or rent in excess of the maximum amount allowed by any restriction placed on the unit in accordance with this Article. (2) No person shall sell or rent an Inclusionary Unit to a person or persons that do not meet the income restrictions placed on the unit in accordance with this Article. (3) No person shall provide false or materially incomplete information to the City or to a seller or lessor of an Inclusionary Unit to obtain occupancy of housing for which that person is not eligible. (g) Principal Residency Requirement. (1) The owner or lessee of an Inclusionary Unit shall reside in the unit for not less than ten out of every twelve months. (2) No owner or lessee of an Inclusionary Unit shall lease or sublease, as applicable, an Inclusionary Unit without the prior permission of the Executive Director. Section 9. Section 41-1907 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Sec. 41-1907. Takings Determination (a) Determination of a taking of property without just compensation. In accordance with the procedures provided by this Section, a Developer may request a determination as to whether the requirements of this Article, taken together with the inclusionary incentives as applied to the Residential Project, would constitute a taking of property without just compensation under the California or Federal Constitutions. (1) The Developer may request the Executive Director to make a takings determination within fifteen (15) days of approval or disapproval of Ordinance No. NS-XXX 75B-37 Page 13 of 17 the Inclusionary Housing Plan. The Developer may file an appeal of the takings determination of the Executive Director within fifteen (15) calendar days after the date of the decision. Any appeal shall be subject to the provisions of Chapter III of the Santa Ana Municipal Code. (b) Presumption of facts. In making the takings determination, the Executive Director, shall presume each of the following facts: (1) Application of requirements. Application of the inclusionary housing requirement to the Residential Project; (2) Incentives. Application and utilization of all density bonuses and incentives available under State and local law; (3) Product type. Utilization of the most cost-efficient product type for the Inclusionary Units that would meet the standards of this Article; and (4) External funding. The reasonable availability of external funding. (c) Modifications to reduce obligations. If it is determined that the application of the provisions of this Article would be a taking, the Inclusionary Housing Plan shall be modified to reduce the obligations in the inclusionary housing component to the extent, and only to the extent necessary, to avoid a taking. If it is determined no taking would occur through application of this Article to the Residential Project, the requirements of this Article remain applicable. Section 10. Section 41-1908 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Sec. 41-1908. Enforcement (a) Any violation of this Article constitutes a misdemeanor. (b) Forfeiture of funds. Any individual who sells or rents an Inclusionary Unit in violation of this Article shall be required to forfeit all money so obtained. Recovered funds shall be deposited into the Inclusionary Housing Fund. (c) Legal actions. The City may institute any appropriate legal actions or proceedings necessary to ensure compliance with this Article, including actions: (1) To disapprove, revoke, or suspend any permit, including a Building Permit, Certificate of Occupancy, or discretionary approval; and (2) For injunctive relief or damages. Ordinance No. NS-XXX 75B-38 Page 14 of 17 (d) Recovery of costs. In any action to enforce this Article, or an Inclusionary Housing Agreement recorded hereunder, the City shall be entitled to recover its reasonable attorney's fees and costs. Section 11. Section 41-1909 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Sec. 41-1909. Inclusionary Housing Fund (a) Inclusionary Housing Fund. There is hereby established a separate fund of the City, to be known as the Inclusionary Housing Fund. All monies collected pursuant to this Article shall be deposited in the Inclusionary Housing Fund. Additional monies from other sources may be deposited in the Inclusionary Housing Fund. The monies deposited in the Inclusionary Housing Fund shall be subject to the following conditions: (1) Monies deposited into the Inclusionary Housing Fund must be used to increase and improve the supply of housing affordable to Moderate, Low and Very Low Income Households in the City. Monies may also be used to cover reasonable administrative or related expenses associated with the administration of this Article. (2) The fund shall be administered by the Executive Director, or his or her designee, who may develop procedures to implement the purposes of the Inclusionary Housing Fund consistent with the requirements of this Article and any adopted budget of the City. (3) Monies deposited in accordance with this Section shall be used in accordance with the City's Housing Element, Redevelopment Plan, Consolidated Plan, or subsequent plan adopted by the City Council to construct, rehabilitate, or subsidize affordable housing or assist other government entities, private organizations, or individuals to do so. Permissible uses include, but are not limited to, assistance to housing development corporations, equity participation loans, grants, pre- home ownership co-investment, pre-development loan funds, participation leases, or other public-private partnership arrangements. The Inclusionary Housing Fund may be used for the benefit of both rental and owner-occupied housing. Section 12. Section 41-1910 is added to Chapter 41 of the Santa Ana Municipal Code to read in full as follows: Ordinance No. NS-XXX 758-39 Page 15 of 17 Sec. 41-1910. Administrative (a) Fees. The Council may by resolution establish reasonable fees and deposits for the administration of this Article. (b) Administrative Procedures. The City Manager is hereby authorized and directed to promulgate Administrative Procedures for the implementation of this Article. Section 13. If any section, subsection, sentence, clause, phrase or portion of this ordinance is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council of the City of Santa Ana hereby declares that it would have adopted this ordinance and each section, subsection, sentence, clause, phrase or portion thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional. ADOPTED this day of 2011 Miguel A. Pulido Mayor APPROVED AS TO FORM: Joseph Straka, City Attorney By: Ryan O. Hodge Assistant City Attorney AYES: Councilmembers NOES: Councilmembers ABSTAIN: Councilmembers NOT PRESENT: Councilmembers Ordinance No. NS-XXX 756_40 Page 16 of 17 CERTIFICATE OF ATTESTATION AND ORIGINALITY I, MARIA D. HUIZAR, Clerk of the Council, do hereby attest to and certify that the attached Ordinance No. NS-XXX to be the original ordinance adopted by the City Council of the City of Santa Ana on , and that said ordinance was published in accordance with the Charter of the City of Santa Ana. Date: Clerk of the Council City of Santa Ana Ordinance No. NS-XXX 75B-41 Page 17 of 17 75B-42