F:atty\muni\laws\barry\AHPP2011Amendment CC 06-14-11

City Council Meeting 06-14-11                                            Santa Monica, California

ORDINANCE NUMBER (CCS)

(City Council Series)

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
SANTA MONICA AMENDING SANTA MONICA MUNICIPAL CODE SECTION 9.56.070 TO ADJUST THE TIME TO UNDERTAKE A COMPREHENSIVE STUDY OF AFFORDABLE HOUSING FEES

WHEREAS, the City's Affordable Housing Production Program, Chapter 9.56 of the Santa Monica Municipal Code (the "AHPP"), requires developers of multi-family housing project to contribute to affordable housing production and thereby help the City meet its affordable housing goals; and  

WHEREAS, the requirements of the AHPP are based on a number of factors including, but not limited to, the City’s long-standing commitment to economic diversity; the serious need for affordable housing as reflected in local, state, and federal housing regulations and policies; the demand for affordable housing created by market rate development; the depletion of potential affordable housing sites by market-rate development; and the impact that the lack of affordable housing production has on the health, safety, and welfare of the City’s residents including its impacts on traffic, transit and related air quality impacts, and the demands placed on the regional transportation infrastructure; and

WHEREAS, subject to certain exceptions, the requirements of the AHPP can be met through various alternatives including providing affordable housing units on-site, providing affordable housing units off-site, acquiring land for affordable housing, and paying an affordable housing fee; and

WHEREAS, in establishing the appropriate affordable housing fee, the City  prepared a series of analyses of the relationship between new market rate apartment and condominium development in the City and the need for affordable housing created by this new development; and

WHEREAS, the initial study was prepared in July 1998 by HR&A Advisors, Inc. (“HR&A”); and

WHEREAS, HR&A updated this analysis in March 2000; and

WHEREAS, in July 2005, HR&A completed a new update of this analysis; and

WHEREAS, the July 2005 study, as did the earlier studies, focused on the relationship between the demand for goods and services created by households who occupy new market rate multi-family development in the City, the number of low-wage workers in public agencies and businesses needed to satisfy this demand, and the costs of producing the affordable housing needed by these workers; and

WHEREAS, this study demonstrated the range per square foot which could be imposed on new market rate multi-family development to help finance the development of affordable housing needed to meet the demand created by market rate development; and

WHEREAS, on November 8, 2005, the City Council amended Santa Monica Municipal Code Section 9.56.070 to provide that commencing on July 1, 2006, the Affordable Housing Unit Base Fee shall be automatically adjusted annually by City Council resolution based on changes in construction costs and land costs; and

WHEREAS, in order to implement the Council’s decision, staff formulated a specific method of measuring changes in construction costs and land costs; and

WHEREAS, this proposed methodology was detailed in an April 24, 2006 letter prepared by HR&A on behalf of the City and approved by the Council on June 13, 2006; and

WHEREAS, on June 13, 2006, the City Council amended Santa Monica Municipal Code Section 9.56.070 to provide that the City’s affordable housing unit development cost shall be established by resolution and that commencing on July 1, 2007, the affordable housing unit development cost shall be automatically adjusted annually by City Council based on changes in construction costs and land costs; and

WHEREAS, Santa Monica Municipal Code Section 9.56.020 defines “affordable housing unit development cost” as “the City’s average costs to develop a unit of housing affordable to low- and moderate-income households;” and

WHEREAS, in order to implement the Council’s decision that the affordable housing unit development cost be adjusted based on changes in development costs and lands, staff formulated a specific method of measuring changes in construction costs and land costs; and

WHEREAS, this proposed methodology was also detailed in the April 24, 2006 letter prepared by HR&A and approved by the Council on June 13, 2006; and

WHEREAS, Section 9.56.070 provides that no later than July 1, 2010 and every five years thereafter, the City will conduct a comprehensive study of the affordable housing unit development cost and the affordable housing unit base fee; and

WHEREAS, updating the Nexus Study would require about six months and would cost approximately $50,000 for consultant analysis and hearings support, assuming the same analytic approach used in previous Nexus Study updates were to be employed; and

WHEREAS, this analytic approach, which has been a model for other California cities, remains appropriate, particular given recent judicial decisions; and

WHEREAS, this is not the most suitable time to update the City’s Nexus Study due in large measure to the lingering adverse effects of the recent national recession; and

WHEREAS, although general economic conditions in Santa Monica appear to be somewhat more favorable than in other parts of the State, the statewide unemployment rate is still in double digits and the housing market continues to languish; and

WHEREAS, an update of the Nexus Study would necessarily utilize data and market conditions derived from this low point in the economic cycle, and would thereby provide a questionable basis for setting long-term baseline standards for this essential City program; and

WHERAS, an appropriate alternative approach would be to continue the annual inflation adjustment of applicable housing fee and affordable housing cost factors for at least another few years until market conditions are projected to have reached greater stability and be more reflective of more typical economic conditions; and

WHEREAS, as detailed above, the Nexus Study methodology is based on the affordable housing need associated with a portion of the labor demand generated by household spending in new market rate multi-family development, with the amount of new household spending imputed from the cost of this new market rate housing; and

WHEREAS, the affordable housing unit base fee and affordable housing unit development cost annual adjustment is based on changes in construction costs and land costs with the weighted average annual change in medium condominium sale prices by ZIP Code similarly used as a proxy measure for land cost changes measured for the immediately preceding calendar year; and

WHEREAS, the annual inflation adjustment accounts for annual changes in the cost of such housing in the City; and

WHEREAS, in the short-term, this method serves as a reasonable basis for ensuring that the amount of the AHPP Base Unit Fee and the AHPP Housing Development Unit Cost maintain their association with the Nexus Study methodology and remain consistent with annual changes in short-term market conditions,

 

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS:

SECTION 1.  Santa Monica Municipal Code Section 9.56.010 is hereby amended to read as follows:

Section 9.56.070.  Affordable housing fee.

A multi-family project applicant eligible to meet the affordable housing obligations established by this Chapter by paying an affordable housing fee shall pay the fee in accordance with the following requirements:

(a)   An affordable housing fee may be paid in accordance with the following formulas:

(1)   Multi-family projects in Multi-family Residential Districts:

Affordable housing unit base fee x floor area of multi-family project;

(2)   Multi-family projects in Multi-family Residential Districts on vacant parcels:

Affordable housing unit base fee x floor area of multi-family project x seventy-five percent;

(3)   Multi-family projects in Industrial/Commercial Districts on parcels that are either not already developed with multi-family housing or are already developed with multi-family housing, but the multi-family project preserves the existing multi-family housing or a Category C removal permit has been obtained for the existing multi-family housing:

Affordable housing unit base fee x floor area of project devoted to residential uses x fifty percent.

(4)   Multi-family projects with fractional affordable housing units of less than 0.75 based on the formula established in Section 9.56.050(d):

City’s affordable housing unit development cost x fractional percentage.

(b)   For purposes of this Section, the affordable housing unit base fee shall be established by resolution of the City Council. Commencing on July 1, 2006 and on July 1st of each fiscal year thereafter, the affordable housing unit base fee shall be adjusted based on changes in construction costs and land costs. No later than July 1, 2015, 2010, and approximately every five year period thereafter, the City will conduct a comprehensive study of these fees and the results of the comprehensive study shall be reported to the City Council. The amount of the affordable housing fee that the multi-family project applicant must pay shall be based on the affordable housing unit base fee resolution in effect at the time that the affordable housing fee is paid to the City.

(c)   For purposes of this Section, the City’s affordable housing unit development cost shall be established by resolution of the City Council. Commencing on July 1, 2007 and on July 1st of each fiscal year thereafter, the City’s affordable housing unit development cost shall be adjusted based on changes in construction costs and land costs. No later than July 1, 2015, 2010 and approximately every five year period thereafter, the City will conduct a comprehensive study of these fees and the results of the comprehensive study shall be reported to the City Council. The affordable housing fee that the multi-family project applicant must pay shall be based on the affordable housing unit development cost resolution in effect at the time of payment to the City.

(d)   The amount of the affordable housing unit base fee may vary by product type (apartment or condominium) and shall reflect, among other factors, the relationship between new market rate multi-family development and the need for affordable housing.

(e)   The affordable housing fee shall be paid in full to the City prior to the City granting any approval for the occupancy of the project, but no earlier than the time of building permit issuance.

(f)    The City shall deposit any payment made pursuant to this Section in a reserve account separate from the General Fund to be used only for development of very low- and low-income housing, administrative costs related to the production of this housing, and monitoring and evaluation of this affordable housing production program. Any monies collected and interest accrued pursuant to this Chapter shall be committed within five years after the payment of such fees or the approval of the multi-family project, whichever occurs later. Funds that have not been appropriated within this five-year period shall be refunded on a pro rata share to those multi-family project applicants who have paid fees during the period. Expenditures and commitments of funds shall be reported to the City Council annually as part of the City budget process.

(g)   An affordable housing fee payment pursuant to this Section shall not be considered provision of affordable housing units for purposes of determining whether the multi-family project qualifies for a density bonus pursuant to Government Code Section 65915.

SECTION 2.  Any provision of the Santa Monica Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance.

SECTION 3.  If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance.  The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional.

SECTION 4.  The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance.  The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption.   This Ordinance shall become effective 30 days from its adoption.

APPROVED AS TO FORM:

 

 

_________________________

MARSHA JONES MOUTRIE

City Attorney