HomeMy WebLinkAbout3/5/2024 Item 8a, Tway - Staff Agenda CorrespondenceCity of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: March 5, 2024
TO: Mayor and Council
FROM: Timothea Tway, Community Development Director
VIA: Derek Johnson, City Manager
SUBJECT: ITEM 8a. - HOUSING NEEDS AND OPPORTUNITIES STUDY SESSION
Staff received the following questions regarding the housing needs and opportunities
study session. The questions are summarized below with staff’s response shown in
italics:
1) Do we know why developers are not utilizing the flexible density ordinance in
Downtown?
Answer: Several developers have expressed interest in using the Downtown Flexible
Density ordinance, since it was adopted in April of 2023. One formal application and one
pre-application have been submitted for flexible density projects, however, no projects
have been entitled using flexible density at this time. It is difficult for staff to speculate as
to why no projects have completed the entitlement process, however, there are a number
of factors that could be impacting the use of the ordinance including, but not limited to:
• It can take time for property owners and developers to utilize provisions of new
regulations. This ordinance is less than one year old.
• There have been recent sharp increases in construction costs and financing that
are likely impacting the ability of applicants to move forward with new projects.
• It is possible that property owners/developers are not aware of all of the provisions
of the flexible density program.
• Sites in downtown can be physically constrained in ways that make it difficult to
develop or have owners that are not interested in development projects at this time.
2): Do we know the number of vacant residences in town?
Answer: Current estimates are between 8.3-9%. Below are two of the data sets to draw
from:
• According to the 2020 Decennial Census there were 1,790 vacant units in the City
of San Luis Obispo and 19,772 occupied units (making a total of 21,562 total units
at the time). This is a 8.3% occupancy rate.
• CA Department of Finance E-5 Population and Housing Estimates cite a 9%
vacancy rate for SLO. SLOCOG’s Data Drive page for Housing has good
summaries from CA DOF and CA HCD:
https://data-drive-slocog.hub.arcgis.com/pages/housing?preview=true
Item 8a. - HOUSING NEEDS AND OPPORTUNITIES STUDY SESSION Page 2
3) Are there incentives for renting ADU or other rentals to Section 8 voucher
holders or other ways to make market rate more accessible?
Answer:
The Housing Authority of San Luis Obispo (HASLO) operates a Landlord Housing Choice
Voucher Program https://www.haslo.org/landlord-information-resources where interested
landlords can advertise their rentals to potential residents by listing the property on
"HASLO's Affordable Housing Website". The property must be ready to occupy, and
documentation must be completed for the Housing Choice Voucher Program (Section 8),
with inspection, all facilitated through HASLO. This program is not restricted to ADU’s
but may be used for ADUs if the unit meets HASLO’s criteria.
Additionally, Smart Share Housing Solutions, a public benefit non-profit corporation,
operates HomeShareSLO that facilitates matches between those with an extra room and
those looking for affordable housing, and ADU SLO, that assists property owners on the
logistics of adding housing units using backyards, garages, infill lots and existing
buildings.
There are jurisdictions that provide various incentives or have programs that facilitate
loans in order to produce ADUs. In addition, there are jurisdictions that provide incentives
or loan programs to property owners that both produce ADUs and rent ADUs to low
income households. According to the UC Berkeley Center for Community Innovation
(https://www.aducalifornia.org/best-practices/) the following programs exist (in addition to
many others):
- City of Carlsbad allows developers to comply with inclusionary requirements by
constructing ADUs with 55 year deed restrictions for low income tenants. The City
of San Luis Obispo’s Inclusionary Housing Ordinance (IHO) exempts ADUs, and
therefore cannot be used to satisfy a project’s inclusionary housing requirement.
- The Town of Ross allows property owners to build larger ADUs if they have an
affordability contract.
- The City of LA has a program that matches ADU rentals with older adults who need
housing. The homeowners receive benefits like tenant referrals and case
management.
- The County of LA has a pilot program that provides forgivable loans to
homeowners that rent their ADUs to families experiencing homelessness for 10
years.
Conceptually a jurisdiction could craft an incentive program in many different ways.
Consideration should be given to the potential impact of the program as well as the
potential cost of the program (both up front costs as well as ongoing costs related to
ensuring compliance with program parameters).
Item 8a. - HOUSING NEEDS AND OPPORTUNITIES STUDY SESSION Page 3
4) Do we track the conversion of R-1 to retail or commercial?
Answer:
Such change from residential to commercial/retail would require a General Plan
amendment and Rezone and would ultimately require approval by the City Council.
Conversion of residential to commercial in the Downtown Planning Area is subject to no
net housing loss provisions, and no such applications have been received this housing
element cycle.
Anecdotally, the pressure seems to be in the opposite direction. Staff increasingly fields
questions regarding conversion of commercial space into residential uses. There are
several projects in process that are requesting to allow more housing than currently
allowed, such as the Margarita Area Specific Plan update to include more housing
opportunities. State legislation also aims to increase more residential in commercial
areas, including AB2011 (Wicks), passed in September 2022, and effective July 1, 2023,
that provides a streamlined ministerial approval pathway for qualifying multi-family
projects (which must meet labor standards) on commercially -zoned land.
5) What are the policy options around revenue generation from a measure to
increase fees from second home ownership?
Answer: Bond measures and other local revenue measures are touched upon in the
report (Future Opportunities to Encourage Below Market Rat Housing, No. 2). Regarding
specific measures pertaining to second home ownership, there are a few jurisdictions
(described below) that have attempted a measure to develop a revenue stream for
affordable housing through increased fees for second homes. This strategy would require
additional research to be able to inform the Council regarding feasibility, resources
needed, and impact of such a program for SLO.
• City of Santa Cruz
o In 2022 the voters in Santa Cruz rejected “Measure N,” which would have
taxed vacant properties in the City. This would have required property
owners to declare to the City whether a house had been occupied for at
least 120 days within a year. If properties were not occupied for at least
120 days a year, then the property owner would pay a tax to raise money
that would be used to construct new affordable housing or purchase
properties to convert to affordable housing.
• City of Oakland:
o In 2018 voters in the City of Oakland approved the Oakland Vacant Property
Tax that established an annual tax of $3,000 to $6,000 on properties that
are used less than 50 days a year and do not meet a predefined exception
to the rule.
Item 8a. - HOUSING NEEDS AND OPPORTUNITIES STUDY SESSION Page 4
6) Some places have put prohibitions on hedge fund and private equity ownership
of rental stock. How significant of an issue is this in SLO?
Answer: This has generally been identified as a significant issue in large metropolitan
areas including Los Angeles and San Francisco as identified in studies used by Assembly
Member Alex Lee in a recent proposal for AB 2585 that would prevent investors who own
more than 1,000 single-family homes from purchasing more.
• For more information on proposed AB 2585 please visit:
o https://sfstandard.com/2024/02/20/alex-lee-proposes-corporate-landlord-
ban-single-family/ and
https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=2023202
40AB2584
7) Do we need a rental registry in order to have a better understanding of what and
who are having the largest impacts on existing housing stock?
Answer: It depends on the information that one would want to gather. Without rental
registry, the City is limited in its ability to gather specifics about rental housing stock in the
city including: who owns rental housing, how much rental housing they own, what annual
rents for each unit are, how much rents are increasing, how long tenants stay in particular
units, etc. The City does have the ability to pull data from various sources to understand
macro trends related to housing and rental housing. In addition, landlords that rent
housing units in the City should be applying for a business license and limited information
may be available through those applications. Additionally, there are studies completed
from time to time such as SLOCOG’s Accessory Dwelling Unit and Mobile/Manufactured
Home Market Study Report completed in 2020 that also offer snapshots about some
types of rental housing, but the City does not have comprehensive data going forward
without a rental registry. Larger cities have rental registries, however development and
operation of a program would be resource intensive. The establishment of a rental
registry would require additional staff and ongoing resources to maintain.
There have been some attempts at legislation for a statewide rental registry, for example
AB 2469 (Wicks) and 1188 (Wicks) in 2022, and SB 395 (Wahab) in 2023; however, these
bills failed to advance.
8) Are there gaps in regulations as related to rental properties? Do we need to
update our codes around rental housing?
Answer: As the City does not have a local rent control ordinance, the State regulations
apply to renters in the City (https://www.courts.ca.gov/documents/California-Tenants-
Guide.pdf). Local code changes can be implemented depending on the desired outcome.
It should be noted that there are state laws the restrict local agencies in their ability to
regulate certain things related to rental housing (such as Costa-Hawkins). Any direction
from City Council regarding this matter can be studied further by staff to determine
feasibility of future code changes, impact of the code changes, and cost of
implementation.
Item 8a. - HOUSING NEEDS AND OPPORTUNITIES STUDY SESSION Page 5
9) Page 88 of the packet states that we have collected about $416k from in lieu fees
for Inclusionary Housing Ordinance. Can you tell me how many units have been
built by projects, as a result of that ordinance (as opposed to those that have paid
fees)?
Answer: The majority of projects permitted since the updated Inclusionary Housing
Ordinance (IHO) are either smaller projects that have opted to pay in-lieu fees, or projects
entitled under separate development agreements (San Luis Ranch and Avila Ranch for
example) and are not subject to the ordinance. Other projects chose to construct BMR
units through density bonus incentives. Staff will learn more in future months as some
projects subject to the updated IHO and opting to construct units are still under review for
unit numbers and affordability as the IHO is still fairly new.
10) On Page 107, there is a GREAT table listing all the development projects and
where they are in the process. Can you tell us how many of the units fall into the
different categories from the report? (ie. How many are BMR and at what level?
How many are market rate, missing middle, etc.? How many are permanent
supportive, etc?). The table on 109 gives some of this information, but it’s not
provided for all projects.
Answer: Please see Attached Revised Table for Attachment B with additional information
for BMR units.
11) Are there other areas besides Upper Monterey and Mid-Higuera that staff
recommend could potentially benefit from specific plan changes or zoning
changes to allow for greater density?
Answer: These areas are in addition to current efforts to look at the Margarita Area
Specific Plan and Airport Area Specific Plans for additional housing options and densities.
Otherwise, potential areas could be along arterial or collector roadways such as Foothill
Blvd. and Grand Ave.
Revised Attachment B Major Development Projects in the Construction Pipeline
Major Development Projects
Development Status Unit Count BMR
Orcutt Area Under Construction 36 9
San Luis Ranch Permits Issued 164 1 Workforce
Avila Ranch Under Construction 66
6 Moderate, 8
Workforce
2800 Broad Mixed-Use Under Construction 20 Paid Fee
Lofts at the Creamery Under Construction 36 2 Very Low - DB
1131 Olive Mixed Use Under Construction 10 1 Very Low - DB
Peach Street Commons Under Construction 5 Paid Fee
Laurel Creek Mixed Use Under Construction 100 1 Moderate
Montalban Mixed Use Under Construction 11 4 Very Low
Victoria Crossing Mixed Use Under Construction 30 3 Low - DB
Total 478 35