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HomeMy WebLinkAbout06-08-2022 PC Agenda Packet - AMENDED Planning Commission REVISED AGENDA Wednesday, June 8, 2022, 6:00 p.m. Council Chambers, 990 Palm Street, San Luis Obispo The City of San Luis Obispo has returned to in-person meetings. Zoom participation will not be supported. For those attending in-person, City facilities will be at limited capacity and masks are strongly recommended. Planning Commission meetings can be viewed remotely on Channel 20 and the City’s YouTube Channel: http://youtube.slo.city INSTRUCTIONS FOR PUBLIC COMMENT: Public Comment prior to the meeting (must be received 3 hours in advance of the meeting): Mail - Delivered by the U.S. Postal Service. Address letters to the City Clerk's Office at 990 Palm Street, San Luis Obispo, California, 93401. Email - Submit Public Comments via email to advisorybodies@slocity.org. In the body of your email, please include the date of the meeting and the item number (if applicable). Emails will not be read aloud during the meeting. Voicemail - Call (805) 781-7164 and leave a voicemail. Please state and spell your name, the agenda item number you are calling about, and leave your comment. Verbal comments must be limited to 3 minutes. Voicemails will not be played during the meeting. *All correspondence will be archived and distributed to members, however, submissions received after the deadline will not be processed until the following day. Public Comment during the meeting: Meetings have returned to an in-person format. To provide public comment during the meeting, you must be present in the Council Chambers. Electronic Visual Aid Presentation. To conform with the City's Network Access and Use Policy, Chapter 1.3.8 of the Council Policies & Procedures Manual, members of the public who desire to utilize electronic visual aids to supplement their oral presentation are encouraged to provide display-ready material to the City Clerk by 12:00 p.m. on the day of the meeting. Contact the City Clerk's Office at cityclerk@slocity.org or (805) 781-7100. Pages 1.CALL TO ORDER Chair Quincey will call the Regular Meeting of the Planning Commission to order. 2.PUBLIC COMMENT FOR ITEMS NOT ON THE AGENDA At this time, people may address the Commission about items not on the agenda. Comments are limited to three minutes per person. Items raised at this time are generally referred to staff and, if action by the Commission is necessary, may be scheduled for a future meeting. 3.CONSENT Matters appearing on the Consent Calendar are expected to be non- controversial and will be acted upon at one time. A member of the public may request the Planning Commission to pull an item for discussion. The public may comment on any and all items on the Consent Agenda within the three-minute time limit. Recommendation: To approve the Consent Item. 3.a.CONSIDERATION OF MINUTES - MAY 25, 2022 PLANNING COMMISSION MINUTES 5 Consideration of the Planning Commission Minutes of May 25, 2022. 4.PRESENTATION *4.a.CLEAN ENERGY CHOICE PROGRAM PRESENTATION Receive a presentation from Sustainability Manager Chris Read on the 2022 program update for the Clean Energy Choice Program for New Buildings including requirements that new buildings be all-electric. 5.PUBLIC HEARINGS Note: Any court challenge to the action taken on public hearing items on this agenda may be limited to considering only those issues raised at the public hearing or in written correspondence delivered to the City of San Luis Obispo at, or prior to, the public hearing. If you wish to speak, please give your name and address for the record. Please limit your comments to three minutes; consultant and project presentations limited to six minutes. 5.a.REPEAL AND REPLACE THE CITY OF SAN LUIS OBISPO’S MUNICIPAL CODE CHAPTER 17.138 (INCLUSIONARY HOUSING REQUIREMENTS) TO UPDATE REGULATIONS FOR CONSISTENCY WITH THE 6TH CYCLE HOUSING ELEMENT 9 Recommendation: Adopt a draft Resolution to: Recommend that the City Council introduce and adopt an Ordinance repealing and replacing the City of San Luis Obispo Municipal Code Chapter 17.138 (Inclusionary Housing Requirements); and 1. Review proposed commercial linkage fees and housing in-lieu fees and ensure they are supported by the Nexus Study and Feasibility Analysis. 2. 6.COMMENT AND DISCUSSION 6.a.STAFF UPDATES AND AGENDA FORECAST Receive a brief update from Deputy Community Development Director Tyler Corey. 7.ADJOURNMENT The next Regular Meeting of the Planning Commission is scheduled for June 22, 2022 at 6:00 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo. LISTENING ASSISTIVE DEVICES for the hearing impaired--see the Clerk The City of San Luis Obispo wishes to make all of its public meetings accessible to the public. Upon request, this agenda will be made available in appropriate alternative formats to persons with disabilities. Any person with a disability who requires a modification or accommodation in order to participate in a meeting should direct such request to the City Clerk’s Office at (805) 781-7100 at least 48 hours before the meeting, if possible. Telecommunications Device for the Deaf (805) 781-7410. Planning Commission meetings are televised live on Charter Channel 20 and on the City's YouTube Channel: http://youtube.slo.city. Agenda related writings or documents provided to the Planning Commission are available for public inspection on the City’s website: https://www.slocity.org/government/mayor-and- city-council/agendas-and-minutes. 1 Planning Commission Minutes May 25, 2022, 6:00 p.m. Council Chambers, 990 Palm Street, San Luis Obispo Planning Commissioners Present: Commissioner Emily Francis, Commissioner Bob Jorgensen, Commissioner Juan Munoz-Morris, Vice Chair Steve Kahn, Chair Nick Quincey Planning Commissioners Absent: Commissioner Michael Hopkins, Commissioner Mike Wulkan City Staff Present: Community Development Director Michael Codron, Senior Planner Rachel Cohen, Assistant City Attorney Mark Amberg, Deputy City Clerk Kevin Christian _____________________________________________________________________ 1. CALL TO ORDER A Regular Meeting of the San Luis Obispo Planning Commission was called to order on May 25, 2022 at 6:00 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo, by Chair Quincey. 2. PUBLIC COMMENT FOR ITEMS NOT ON THE AGENDA Public Comment: None --End of Public Comment-- 3. CONSENT Motion By Commissioner Jorgensen Second By Commissioner Francis To approve the Consent Agenda: Item 3a - Minutes of the Planning Commission May 11, 2022 Item 3b - Review of Fiscal Year 22-23 Budget Supplement Capital Improvement Plan, General Plan Conformity CARRIED Page 5 of 60 2 4. PUBLIC HEARINGS 4.a 1381 CALLE JOAQUIN (ARCH-0783-2021) REVIEW OF A NEW 30,986 SQUARE FOOT AUTO DEALERSHIP AND SIGN PROGRAM, WITH A REQUEST FOR A FENCE HEIGHT EXCEPTION Senior Planner Rachel Cohen presented the staff report and responded to Commission inquiries. Chair Quincey opened the Public Hearing Public Comments: None --End of Public Comment-- Chair Quincey closed the Public Hearing Motion By Vice Chair Kahn Second By Commissioner Munoz-Morris Adopt the Draft Resolution approving the project based on findings and subject to conditions of approval. "A RESOLUTION OF THE SAN LUIS OBISPO PLANNING COMMISSION APPROVING THE ARCHITECTURAL DESIGN OF A NEW 30,986 SQUARE FOOT AUTO DEALERSHIP AND SIGN PROGRAM WITH A REQUEST FOR A FENCE HEIGHT EXCEPTION AND A DETERMINATION THAT THE PROJECT IS EXEMPT FROM THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) AS REPRESENTED IN THE PLANNING COMMISSION AGENDA REPORT AND ATTACHMENTS DATED MAY 25, 2022 (1381 CALLE JOAQUIN, FILE #ARCH-0783-2021)" Ayes (5): Commissioner Francis, Commissioner Jorgensen, Commissioner Munoz-Morris, Vice Chair Kahn, and Chair Quincey Absent (2): Commissioner Hopkins, and Commissioner Wulkan CARRIED (5 to 0) Page 6 of 60 3 4.b 2406 & 2414 JOHNSON AVE. (APPL-0182-2022) APPEAL OF THE MINOR DEVELOPMENT REVIEW APPROVAL OF TWO, NEW PRE- MANUFACTURED SINGLE-UNIT RESIDENCES AND A PRE- MANUFACTURED ACCESSORY DWELLING UNIT Senior Planner Rachel Cohen presented the staff report and responded to Commission inquiries. Community Development Director Michael Codron and Assistant City Attorney Mark Amberg provided information regarding application of the Housing Accountability Act to the proposed project in response to an inquiry by Chair Quincey. Appellant representative, Joe Boud, reviewed various points submitted in the appeal. Applicant Jeffrey Spevack provided comments regarding the proposed project and reviewed his design considerations for the lots. Chair Quincey opened the Public Hearing Public Comments: Paula Dooley Maureen Eyerman --End of Public Comment-- Chair Quincey closed the Public Hearing Motion By Commissioner Munoz-Morris Second By Commissioner Jorgensen Adopt the Draft Resolution denying the appeal of the minor development review approval of two, new pre-manufactured single-unit residences and a pre-manufactured accessory dwelling unit on two separate lots with shared driveway access. "A RESOLUTION OF THE SAN LUIS OBISPO PLANNING COMMISSION DENYING THE APPEAL OF THE MINOR DEVELOPMENT REVIEW APPROVAL OF TWO, NEW PRE-MANUFACTURED SINGLE-UNIT RESIDENCES AND A PRE-MANUFACTURED ACCESSORY DWELLING UNIT ON TWO SEPARATE LOTS WITH SHARED DRIVEWAY ACCESS WITH A DETERMINATION THAT THE PROJECT IS EXEMPT FROM THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) AS REPRESENTED IN THE PLANNING COMMISSION AGENDA REPORT AND ATTACHMENTS DATED MAY 25, 2022 (2406 & 2414 JOHNSON, FILE # APPL-0182-2022)." Page 7 of 60 4 Ayes (5): Commissioner Francis, Commissioner Jorgensen, Commissioner Munoz-Morris, Vice Chair Kahn, and Chair Quincey Absent (2): Commissioner Hopkins, and Commissioner Wulkan CARRIED (5 to 0) 5. COMMENT AND DISCUSSION 5.a STAFF UPDATES AND AGENDA FORECAST Senior Planner Rachel Cohen provided an update of upcoming projects. With input from Community Development Director Codron and Assistant City Attorney Mark Amberg, Deputy City Clerk Christian reviewed City Council Resolution 5304 (1984 Series) concerning “Action Minutes”. 6. ADJOURNMENT The meeting was adjourned at 7:22 p.m. The next Regular Meeting of the Planning Commission is scheduled for June 8, 2022, at 6:00 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo. _________________________ APPROVED BY PLANNING COMMISSION: XX/XX/202X Page 8 of 60 PLANNING COMMISSION AGENDA REPORT SUBJECT: REPEAL AND REPLACE THE CITY OF SAN LUIS OBISPO’S MUNICIPAL CODE CHAPTER 17.138 (INCLUSIONARY HOUSING REQUIREMENTS) TO UPDATE REGULATIONS FOR CONSISTENCY WITH THE 6TH CYCLE HOUSING ELEMENT PROJECT ADDRESS: City-wide BY: Rachel Cohen, Senior Planner Phone Number: (805) 781-7574 Email: rcohen@slocity.org FILE NUMBER: CODE-0261-2022 FROM: Tyler Corey, Deputy Director RECOMMENDATION Adopt a draft Resolution (Attachment A) to: 1) Recommend that the City Council introduce and adopt an Ordinance (Attachment B) repealing and replacing the City of San Luis Obispo Municipal Code Chapter 17.138 (Inclusionary Housing Requirements); and 2) Review proposed commercial linkage fees and housing in-lieu fees and ensure they are supported by the Nexus Study and Feasibility Analysis (Attachment C). SUMMARY The City Council has tasked the Community Development Department with updating the Inclusionary Housing Ordinance as part of the 2021-23 Major City Goal work program for Housing. On March 1, 2022, the City Council participated in a Study Session where staff presented background information and analysis on the City’s current affordable housing requirement and a preliminary recommendation on updates to the City’s Inclusionary Housing Ordinance (IHO). City Council provided feedback to staff on a range of topics including fractional units, the removal of Table 2A, calculating total number of inclusionary units based on land use rather than zone, and Below Market Rate (BMR) Administration. Council then directed staff to continue with outreach efforts to stakeholders and the community regarding the proposed updates. 1.0 PLANNING COMMISSION’S PURVIEW The Planning Commission’s role is to review the proposed Municipal Code amendments to Title 17 for consistency with the City’s Housing Element, State Law, clarity, and internal consistency, and to make a recommendation to the City Council regarding the proposed amendments. 2.0 PROJECT INFORMATION Meeting Date: 6/8/2022 Item Number: 5a Time Estimate: 90 Minutes Page 9 of 60 Item 5a CODE-0261-2022 – Inclusionary Housing Ordinance Update Planning Commission Report – June 8, 2022 2.1 Background The City’s first Inclusionary Housing Ordinance (IHO) was adopted in 1999. Since then, more than 1,200 affordable units have been constructed and financed to meet the requirements of the IHO. A lot has changed since 1999, and in 2020 the City hired consultant David Paul Rosen and Associates (DRA) to complete an Affordable Housing Nexus Study. This study evaluated the nexus between new commercial and market-rate residential development. The Study confirmed that both market-rate residential and commercial development are inducing demand for affordable housin g that is not being met by the current housing market. On November 17, 2020, the City Council adopted the 6th Cycle Housing Element, which includes housing policies and programs for the 2020-2028 planning period. Program 2.13 in the 6th Cycle Housing Element requires that city staff update the Inclusionary Housing Ordinance based on the information provided in the Nexus Study. In addition to the Nexus Study, the City hired Economic & Planning Systems, Inc. (EPS) in April 2021 to conduct a feasibility analysis of the City’s proposed affordable housing in - lieu and commercial linkage fees based on the findings and recommendations included in the Nexus Study. EPS has developed a preliminary recommendation on changes to the City’s Inclusionary Housing Ordinance based on their Feasibility Analysis, which was presented to City Council on March 1, 2022. 2.2 Previous Public Review April 21, 2020: City Council received the Affordable Housing Nexus Study that determined that both residential and commercial development are inducing demand for affordable housing that is not being met by the housing market. The Study’s findings verify that there is a nexus that justifies the City having an Inclusionary Housing Ordinance that applies to both residential and commercial development (4.21.20 Council Report and Meeting Minutes). March 1, 2022: City Council conducted a Study Session for the purposes of providing background information and analysis of the City’s current affordable housing requirements, a preliminary recommendation on updates to the City’s Inclusionary Housing Ordinance, a commercial linkage fee recommendation, and an overview of progress of onboarding the City’s Below Market Rate (BMR) Housing Administrator (3.1.22 Council Report and Meeting Minutes). 3.0 PROJECT ANALYSIS 3.1 General Plan Housing Element Consistency The IHO update is part of the City’s Major City Goal work program for Housing and Homelessness and directly implements several 6th cycle Housing Element Programs as described below. Page 10 of 60 Item 5a CODE-0261-2022 – Inclusionary Housing Ordinance Update Planning Commission Report – June 8, 2022 Goal 2 in the City’s adopted and state certified 6th cycle Housing Element is Affordability and states: Accommodate affordable housing productions that helps meet the City’s Quantified Objectives. The City’s Quantified Objectives are the number of housing units that will be planned, building, rehabilitated, and preserved during the Housing Element’s planning period. Housing Element Policy 2.4 states: Encourage housing productions for all financial strata of the City’s population, as allocated in the Regional Housing Needs Allocation, for the 6 th Cycle planning period. The number of units per income category are: extremely low and very low income, 1,405 units. Housing Element Program 2.13 states: Update the Inclusionary Housing Ordinance, including Table 2A, based on findings and recommendations in the 2020 Affordable Housing Nexus Study and conduct further feasibility analysis in order to evaluate the City’s ability to provide affordable housing in the proportions shown in the Regional Housing Needs Allocation, per Policy 2.4. Goal 4 in the 6th cycle Housing Element is Mixed-Income Housing and states: Preserve and accommodate existing and new mixed -income neighborhoods and seek to prevent neighborhoods or housing types that are segregated by economic status. Housing Element Program 4.6 states: Amend the City’s Inclusionary Housing Ordinance to require that affordable units in a development be of similar size, number of bedrooms, character and basic quality as the non-restricted units in locations that avoid segregation of such units, including equivalent ways to satisfy the requirement. Also evaluate adjusting the City’s allowable sales prices for deed-restricted affordable units per a variety of unit types. 3.2 Current Inclusionary Housing Ordinance The Inclusionary Housing Ordinance (IHO) requires a minimum number of affordable housing units be provided with all new development in the City. The IHO program is one of several tools (along with incentives such as parking reductions, density bonuses, flexible development standards, grant programs, and use of the City’s affordable housing fund) to achieve its affordable housing objectives. The City’s first Inclusionary Housing Ordinance was adopted in 1999 and since that time, the City has focused on ensuring that a percentage of all new housing units are affordable to income eligible households. Page 11 of 60 Item 5a CODE-0261-2022 – Inclusionary Housing Ordinance Update Planning Commission Report – June 8, 2022 Current IHO requirements can be met by 1) building affordable dwellings as part of a development project, 2) dedicating real property, improved or not, for development of affordable housing by the City’s Housing Authority or by a non- profit housing provider, 3) paying an in-lieu fee which is used to assist with the development of new affordable housing throughout the City, or 4) a combination of the above methods, to the approval of the Community Development Director. More than 1,200 deed-restricted or otherwise secured affordable dwellings have been planned for, entitled, or built since the adoption of the IHO in 1999. The City has granted, loaned, or committed over $10,750,000 of affordable housing in-lieu funds to assist with the development of over 500 new deed-restricted affordable housing units. 3.3 Affordable Housing Analysis and Recommendations Affordable Housing Nexus Study As noted in Section 2.1 above, the Nexus Study confirmed that both market-rate residential and commercial development are creating demand for affordable housing that is not being met by the current housing market. This conclusion, and the recommendations provided below, were based on current residential and commercial development within the City. The Nexus Study recommendation is based on the maximum justifiable Nexus fees the City could implement to meet the affordable housing demand incurred by current development. Overall, the Study r ecommended that the City adopt fees less than the maximums because fees at these high levels would affect the financial feasibility of development as well as the competitiveness of development in the City. Recommendations from the Nexus Study are provided below in Table 3 . Feasibility Analysis The City hired Economic & Planning Systems, Inc. (EPS) to conduct a feasibility analysis to refine the recommendation provided in the Nexus Study. EPS recommended several revisions to the City’s existing affordable housing inclusionary program for new residential and mixed-use development and introduced a nexus-based commercial linkage fee for non-residential uses based on their feasibility analysis. A summary of the EPS recommendations is provided below in Table 3. Summary Comparison of Affordable Housing Analysis and Recommendations Table 3 provides a comparison between the City’s current IHO, the recommendations from the Nexus Study and Feasibility Analysis. Page 12 of 60 Item 5a CODE-0261-2022 – Inclusionary Housing Ordinance Update Planning Commission Report – June 8, 2022 Table 1: Comparison of the City’s Current IHO, the Nexus Study’s recommendation, and the recommendation based on EPS’ feasibility analysis. Current IHO Nexus Study Recommendation Feasibility Analysis Recommendation Where the IHO applies Requirements differ within City Limits and Expansion Areas Same requirements Citywide Same requirements Citywide Table 2A Adjustments Applies to projects that qualify Remove Remove Residential For Sale Within City Limits: 3% low or 5% moderate income Expansion Area: 5% low and 10% moderate income 15% (5% at low and 10% at moderate) 10% (5% low-income units and 5% moderate income) For Sale In- lieu Fee Within City Limits: 5% of building valuation Expansion Area: 15% of building valuation Apply on a square foot basis (no specific amount recommended) $25 per square foot For Rent Within City Limits: 3% low or 5% moderate income Expansion Area: 5% low and 10% moderate income 15% very low- and low- income units (5% very low and 10% at low) 6% (3% very low- income and 3% low- income) For Rent In- lieu Fee Within City Limits: 5% of building valuation Expansion Area: 15% of building valuation Apply on a square foot basis (no specific amount recommended) $20 per square foot Commercial Commercial Development Within City Limits & Expansion Area: 2 affordable units per acre or 5% of building valuation Nexus justifiable fees: $69- 173 per square foot. Recommended Fee Range based on other jurisdictions: Other Non-residential Uses: $2 to $5 per square foot Industrial Uses: $1 to $4 per square foot Office, service, hotel, and retail uses: $5 per square foot Industrial and Institutional Uses: $4 per square foot Page 13 of 60 Item 5a CODE-0261-2022 – Inclusionary Housing Ordinance Update Planning Commission Report – June 8, 2022 City Council Study Session Feedback On March 1, 2022, the City Council provided the following feedback in response to recommendations provided in the Nexus Study and Feasibility Analysis. The draft Inclusionary Ordinance (Attachment B) reflects changes based on the direction provided by Council and is noted below. 1. Regarding fractional units, two Council members supported an approach for projects that contain 10 units or less where payment of an in-lieu fee would be allowed when the number of required inclusionary dwellings results in a fractional unit. Staff Response: The IHO amendments include the provision that if a project contains 10 units or less and the number of required inclusionary dwellings results in a fractional unit, an applicant may pay the in-lieu fee for the fractional unit or provide one Moderate affordable unit in the project. For example, a residential project proposes to construct six (6) dwelling units for rent. Per Section 17.138.040, the project would have an inclusionary housing requirement of 0.36. The applicant may pay an in-lieu fee for the fractional amount or deed restrict one of the six (6) dwelling units for Moderate-income households (see Attachment B, Section 3, under Section 17.138.080(A): Fractional Numbers). The application of fractional units is being considered because rounding to the next whole number results in smaller projects having a higher percentage of affordable units as compared to those projects with more units. 2. The majority of Council supported the recommendation to remove Table 2A (Inclusionary Housing Adjustment Factors). Staff Response: The IHO amendments include the removal of Table 2A, consistent with the nexus study and financial feasibility analysis recommendations and Council direction. Table 2A was established as a part of the IHO to encourage the development of projects with higher density and smaller unit sizes, that would be considered affordable-by-design within the City. Table 2A has been very successful in achieving smaller units, however, as noted in the Feasibility Analysis, Table 2A is no longer achieving affordability in the current market. The Feasibility Analysis found that under current market conditions, smaller units are not affordable, even for moderate-income households. Most notably, the Feasibility Analysis provides evidence that it is feasible for applicants to construct more affordable units as a part their development projects. 3. Council supported the recommendation to base the inclusionary housing requirement based on project type, rather than zoning or location. Staff Response: The proposed IHO amendments include that inclusionary requirements and commercial linkage fees be calculated based on the land use, rather than the zoning of the site (see Attachment C, Section 3, under Section 17.138.040). The City’s current IHO calculates the required number of units based on acreage and then allows that number to be adjusted based on Table 2A. The amendments to the IHO allow for the number of inclusionary housing units to be Page 14 of 60 Item 5a CODE-0261-2022 – Inclusionary Housing Ordinance Update Planning Commission Report – June 8, 2022 based on the total number of residential units and the commercial linkage fee be based on the total square footage of commercial space proposed as part of a project. This change more accurately captures the housing needs based on the actual uses being proposed as part of the project. 4. The majority of Council also provided direction that staff should increase the Commercial Linkage fee because the recommendation from EPS was lower than what commercial projects are paying under the current IHO. Staff Response: The Feasibility Analysis recommended that office, service, hotel, and retail uses have a Commercial Linkage fee of $5 per square foot and Industrial and Institutional Uses: $4 per square foot. The Analysis noted that this is less than what commercial development projects are paying under the current IHO. In addition, the Nexus Study provides justifiable fees of $69-173 per square foot. Staff is recommending the Commercial Linkage fees be increased to $6 per square foot for office, service, hotel, and retail uses and $5 per square foot for industrial and institutional uses based on three factors: a. The fees are justifiable per the Nexus Study; b. The fees are consistent with recent fees paid by commercial development projects, and c. The current fees have not limited the development of commercial projects within the City. 5. Council supported the recommendation establishing a section in the ordinance that addresses the role and responsibilities of the Below Market Rate (BMR) Administrator, and provided further guidance to work with the BMR Administrator to establish the following: a. Local preference for San Luis Obispo residents or employees, or others who often commute to the City; and b. Long term affordability (maintaining deed-restricted units as long as possible). Staff Response: The proposed IHO amendments include Section 17.138.110 – Administration, Management, and Monitoring (Attachment B, Section 3) which outlines the duties of the BMR Administrator, including the ability to screen and select qualified buyers and renters according to the City’s Ownership and Rental Housing Guidelines and Affordable Housing Standards. Additionally, amendments have been made to Section 17.138.100 – Shared Equity Purchase Program (Attachment B, Section 3) that only allows the offer of units under the Shared Equity Purchase Program when a development project includes affordable housing units for sale in excess of the inc lusionary housing requirement for the project. This change allows for inclusionary units to be retained for a much longer period of time. Page 15 of 60 Item 5a CODE-0261-2022 – Inclusionary Housing Ordinance Update Planning Commission Report – June 8, 2022 6. Council directed staff to continue outreach with various stakeholders and the community. Staff Response: The proposed amendments to the IHO have been presented to the SLO Chamber of Commerce, Economic Development Committee and members of the Developer’s Roundtable. In addition, the proposed amendments have been made available to the public through the City’s Website with opportunities for public feedback via email, phone, mail and Open City Hall. Comments have varied with some supportive of the City requiring affordable housing and others have commented that increasing the requirement and eliminating Table 2A will disincentivize the development of housing within the City and others think that the inclusionary requirement should be higher. 3.4 Additional Key Amendments since release of Draft Ordinance This section outlines key recommended amendments made by staff since the release of the draft IHO. All changes made to the draft IHO since its release to the public are highlighted in Yellow within the legislative draft of Chapter 17.138 in Attachment E. 1. Section 17.138.020 (Applicability & Exclusions) has been amended to clarify that the inclusionary housing ordinance only applies to residential development projects. Commercial development projects are subject to a Commercial Linkage Fee. 2. Section 17.138.030 (Definitions) have been amended to include a definition of “Commercial Linkage Fee” and cross reference the code section that is being amended to include this requirement. 3. Section 17.138.040 (renamed to “Inclusionary Housing Requirements”) has been amended to: o Provide further clarification of the requirements, depending on the type of development, and provides additional references within the code. o Require all commercial square footage be eligible for the Commercial Linkage fee and no longer exempt projects that contain less than 2,500 square feet of new gross floor area of commercial space. o Require that residential subdivisions that result in five (5) or more residential lots or parcels, which do not include any associated or required development plan, shall pay the In-Lieu Housing Fee at the time of building permit issuance for lot development. 4.0 ENVIRONMENTAL REVIEW The proposed amendments to the Municipal Code Title have been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the state CEQA Guidelines, and the environmental regulations of the City. Specifically, the proposed amendments have been determined to be exempt from further environmental review pursuant to CEQA Guidelines Section 15061(b)(3), the “Common Sense” exemption, because the proposed actions will have no possibility of a significant effect on the environment and will not cause impacts as all projects subject to the Inclusionary Housing Ordinance will be required to comply with all relevant City standards, codes, and regulations, including environmental review. Page 16 of 60 Item 5a CODE-0261-2022 – Inclusionary Housing Ordinance Update Planning Commission Report – June 8, 2022 5.0 OTHER DEPARTMENT COMMENTS Staff comments have been incorporated into the proposed changes to Title 17. 6.0 ALTERNATIVES 6.1. Continue project. An action continuing the project should include direction to the staff on pertinent issues. 7.0 ATTACHMENTS A. Draft PC Resolution Recommending the Council Repeal and Replace the IHO and Review In-Lieu Fees and Commercial Linkage Fees B. Draft Ordinance of the IHO C. City Council Draft Resolution for Inclusionary In-lieu and Commercial Linkage Fees D. Draft Commercial Linkage Fee Ordinance (Title 4) E. Legislative Draft of the IHO Page 17 of 60 Page 18 of 60 RESOLUTION NO. PC-XXXX-22 A RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, RECOMMENDING THE CITY COUNCIL INTRODUCE AND ADOPT AN ORDINANCE AMENDING TITLE 17 (ZONING REGULATIONS) OF THE MUNICIPAL CODE, REPEALLING AND REPLACING CHAPTER 17.138 (INCLUSIONARY HOUSING REQUIREMENTS) FOR QUALIFYING DEVEOPMENT PROJECTS WITH AN EXEMPTION FROM ENVIRONMENTAL REVIEW (CEQA) AS REPRESENTED IN THE PLANNING COMMISSION AGENDA REPORT AND ATTACHMENTS DATED JUNE 8, 2022 (CITYWIDE; CODE-0261-2022) WHEREAS, on January 5,1999, The City adopted its first Inclusionary Housing Ordinance contained in Ordinance No. 1346; and WHEREAS, on June 13, 2007, and update was made to the Inclusionary Housing Ordinance regarding resident selection process for inclusionary housing contained in Ordinance No. 1508; and WHEREAS, a Nexus Study was reviewed by Council on April 21, 2020 to determine the feasibility of increasing the required amount of affordable housing in housing projects and implementing that into the City’s Inclusionary Housing Ordinance; and WHEREAS, the City Council of the City of San Luis Obispo conducted a web- based public hearing via teleconference November 17, 2020, for the purpose of final adoption of the sixth cycle update to the General Plan Housing Element that included Program 2.13 that states, “Update the Inclusionary Housing Ordinance, including Table 2A, based on findings and recommendat ions in the 2020 Affordable Housing Nexus Study and conduct further feasibility analysis in order to evaluate the City’s ability to provide affordable housing in the proportions shown in the Regional Housing Needs Allocation, per Policy 2.4”; and WHEREAS, in April 2021, the City hired Economic & Planning Systems, Inc. (EPS) to conduct a feasibility analysis based on the findings and recommendations included in the Nexus Study and current market information and provide preliminary recommendations for updates to the City’s existing Inclusionary Housing Ordinance; and WHEREAS, the State of California Office of Housing and Community Development, on September 3, 2021, certified the City of San Luis Obispo’s 6 th Cycle General Plan Housing Element as in full compliance with State Law; and WHEREAS, a Study Session was held by City Council on March 1, 2022, to review the preliminary recommendations of the feasibility analysis; and WHEREAS, on May 11, 2022, the City published a draft of the proposed amendments to Municipal Code Chapter 17.138 for public review; and Page 19 of 60 Planning Commission Resolution No. PC-XXXX-2022 CODE-0261-2022 (Citywide) Page 2 WHEREAS, the Planning Commission of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California on June 8, 2022, for the purpose of recommending amendments to Chapter 17.138; and WHEREAS, notices of said public hearing were made at the time and in the manner required by the law; and WHEREAS, the Planning Commission has duly considered all evidence, including the testimony of the applicant, interested parties, and the evaluation and recommendations by staff, presented at said hearing. NOW, THEREFORE, BE IT RESOLVED, by the Planning Commission of the City of San Luis Obispo as follows: SECTION 1. Findings. Based upon all evidence, the Planning Commission makes the following findings: 1. The proposed commercial linkage fees and inclusionary housing in-lieu fees are supported by the 2020 Affordable Housing Nexus and 2021 Feasibility Analysis. 2. The proposed amendments to Title 17 of the Municipal Code are consistent with the 6th Cycle Housing Element Program 2.13 which states, “Update the Inclusionary Housing Ordinance, including Table 2A, based on findings and recommendations in the 2020 Affordable Housing Nexus Study and conduct further feasibility analysis in order to evaluate the City’s ability to pr ovide affordable housing in the proportions shown in the Regional Housing Needs Allocation, per Policy 2.4.” 3. The proposed amendments to Title 17 of the Municipal Code are consistent with the 6th Cycle Housing Element Program 4.6 which states, “Amend the City’s Inclusionary Housing Ordinance to require that affordable units in a development be of similar size, number of bedrooms, character and basic quality as the non-restricted units in locations that avoid segregation of such units, including equivalent ways to satisfy the requirement. Also evaluate adjusting the City’s allowable sales prices for deed-restricted affordable units per a variety of unit types.” 4. The replacement of Chapter 17.138 to Title 17 of the Municipal Code will not alter the character of the City or cause health safety or welfare concerns because the amendment is consistent with the General Plan and directly implements City goals and policies. Page 20 of 60 Planning Commission Resolution No. PC-XXXX-2022 CODE-0261-2022 (Citywide) Page 3 SECTION 2. Environmental Determination. The proposed amendments to the Municipal Code Title have been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the state CEQA Guidelines, and the environmental regulations of the City. Specifically, the proposed amendments have been determined to be exempt from further environmental review pursuant to CEQA Guidelines Section 15061(b)(3), the “Common Sense” exemption, because the proposed actions will have no possibility of a significant effect on the environment and will not cause impacts. In this case, the proposed repeal and replacement of the Inclusionary Housing Ordinance is consistent with State Law and the City’s 6th Cycle Housing Element and will not have an significant effect and project specific environmental review will be required. SECTION 3. Action. The Planning Commission hereby recommends the introduction of an ordinance to City Council to repeal and replace, in its entirety, Chapter 17.138, entitled “Inclusionary Housing Requirements”, of the San Luis Obispo Municipal Code as set forth in Exhibit A and incorporated herein. Upon motion of ______________________, seconded by __________________ and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was passed and adopted this 8th day of June 2022. _____________________________ Tyler Corey, Secretary Planning Commission Page 21 of 60 Planning Commission Resolution No. PC-XXXX-2022 CODE-0261-2022 (Citywide) Page 4 EXHIBIT A Chapter 17.138: Inclusionary Housing Requirements Sections: 17.138.010 – Purpose 17.138.020 – Applicability and Exclusions 17.138.030 – Definitions 17.138.040 – Inclusionary Housing Requirements 17.138.050 – Standards for Inclusionary Units 17.138.060 – In-Lieu Housing Fee 17.138.070 – Inclusionary Housing Proposal 17.138.080 – Procedures 17.138.090 – Eligibility Requirements 17.138.100 – Shared Equity Purchase Program 17.138.110 – Administration, Management, and Monitoring 17.138.120 – Enforcement 17.138.010 – Purpose The purpose and intent of this Chapter are: 1) to promote the public welfare by increasing the production and availability of affordable housing units; 2) to establish an inclusionary housing requirement which implements General Plan policies guiding land use and housing development; and 3) to ensure that affordable housing units established pursuant to the provisions of this Chapter are located in a manner that provides for their integration with market rate units. 17.138.020 – Applicability and Exclusions A. This Chapter shall apply to residential development projects consisting of five or more residential lots or new dwelling units. B. The following types of residential development projects are exempt: 1. Residential projects of four new units or less; 2. Residential additions, repairs, or remodels, provided that such work does not increase the number of existing dwellings by five or more dwelling units; 3. The addition or inclusion of Accessory Dwelling Units associated with an existing or proposed residential or mixed-use development; 4. Affordable housing projects in which 100 percent of the dwellings to be built will be sold or rented in conformance with the City’s Affordable Housing Standards (excluding any on-site manager unit); 5. Housing projects that include a density bonus. 6. Emergency projects or projects which the Council determines are necessary to protect public health and safety; 7. Development projects which the Director determines are essentially noncommercial or nonresidential in nature, which provide educational, social, or related services to the community and which are proposed by public agencies, nonprofit agencies, foundations, and other similar organizations; Page 22 of 60 Planning Commission Resolution No. PC-XXXX-2022 CODE-0261-2022 (Citywide) Page 5 8. Projects which replace or restore a structure damaged or destroyed by fire, flood, earthquake, or other disaster within three years prior to the application for the new structure(s) (see Chapter 17.92 Nonconforming Structure); 17.138.030 – Definitions For the purposes of this Chapter, the following words and phrases shall have the meaning set forth below. For all other definitions, the provisions of Article 9 (Definitions) of this Title shall apply. A. “Administrator” means Below Market Rate Program Administrator which may either be the City itself or a third-party administrator acting as an agent for the City in connection with all aspects of the operation of the City's Below Market Rate program pursuant to an Agreement entered into between the City and the Administrator, as such agreement may be amended or replaced from time to time. B. “Affordable” means housing which can be purchased or rented by a household with very low-, low-, or moderate- income, as described in the City’s affordable housing standards. C. “Below Market Rate (BMR)” means that the affordability level of an inclusionary unit is below the cost of what a current market rate unit would be and is affordable to extremely low-, very low-, low-, or moderate-income households. D. “Borrower” shall be defined as one who meets the eligibility requirements for purchasing an inclusionary affordable unit. E. “Commercial Linkage Fee” means the fee paid by the applicant of commercial development projects to mitigate the impacts that such developments have on the demand for affordable housing in the City (see Municipal Code Chapter 4.60). F. “Density bonus” means a density increase over the maximum density otherwise allowable under the Zoning Regulations, Chapter 17.140. G. “Early resale” shall mean the sale, lease, or transfer of property within seven years of the initial close of escrow for Equity Share Inclusionary Units. H. “Equity Share” shall mean the shared equity of appreciation between the City and the Borrower on inclusionary units when agreements specifically allow for affordable units to be sold at market-rate after a 7-year period. I. “Fee Schedule” means fees that for-sale and for-rent units are subject to and are paid to either the City or the Administrator for associated costs related to but not limited to eligibility screening, income verification, marketing of affordable units, and the close of escrow or completion of new lease agreements for affordable units. J. “Inclusionary housing unit” means a dwelling unit required under the provisions of this Chapter, and which meets the City’s affordable housing standards. K. “Low-” or “lower-income households” shall have the meaning set forth in Health and Safety Code Section 50079.5; provided the income of such persons and families shall not exceed 80 percent of the median income within the City as published and periodically updated by the State Department of Housing and Community Development. L. “Market rate” shall mean the highest price a willing buyer would pay and a willing seller would accept, both being fully informed and in an open market, as determined by an appraiser. Page 23 of 60 Planning Commission Resolution No. PC-XXXX-2022 CODE-0261-2022 (Citywide) Page 6 M. “Moderate-income households” shall have the meaning set forth in Health and Safety Code Section 50079.5; provided the income of such persons and families exceed 80 percent but are less than or equal to 120 percent of the median income within the City as published and periodically updated by the State Department of Housing and Community Development. N. “Commercial development project” shall mean development projects which result in the subdivision of land and/or the construction or conversion of structures for the purpose of conducting business, including but not limited to retail sales, restaurants, offices, gas stations, manufacturing, etc. O. “Residential development project” shall mean development projects which result in the subdivision of land and/or the construction or conversion of structures, including, but not limited to, single-unit attached or detached homes, apartments, condominiums, live/work units, mixed-use, mobile homes, transitional housing or supportive housing, and group housing. P. “Very low-income” shall have the meaning set forth in Health and Safety Code Section 50079.5; provided the income of such persons and families shall not exceed 50 percent of the median income within the City as published and periodically updated by the State Department of Housing and Community Development. 17.138.040 – Inclusionary Housing Requirements A. General Requirements. All non-exempt residential development projects shall include inclusionary units as required by this chapter. If the calculated number of units results in a fraction, the number shall be rounded as described in Section 17.138.080(A). 1. Construct the required number of inclusionary units for Residential or Mixed-Use projects; 2. Pay an in-lieu fee for Residential or Mixed-Use projects; or 3. Pay a commercial linkage fee (see Municipal Code Chapter 4.60) for new Non- Residential or Non-Residential portions of Mixed-Use project(s). B. Residential Requirements 1. Ownership Dwelling Units. Ten (10) percent of the dwelling units (see Section 17.138.080.A) shall be made available for sale to eligible households with five (5) percent for low-income households (fractional units may be rounded down to the next whole number) and five (5) percent for moderate-income households (fractional units may be rounded up to the next whole number). See Section 17.138.080.A for more information regarding fractional numbers. 2. Rental Dwelling Units. Six (6) percent of the dwelling units (see Section 17.138.080.A: Fractional Numbers) shall be made available for rent to eligible households with three (3) percent for very low-income households (fractional units may be rounded down to the next whole number) and three (3) percent for low-income households (fractional units may be rounded up to the next whole number). 3. In-Lieu Housing Fees. An applicant may pay in-lieu fees to the City rather than construct inclusionary units on site for residential projects that would create five (5) or more dwelling units or parcels (see Section 17.138.060: In-Lieu Housing Fee). Page 24 of 60 Planning Commission Resolution No. PC-XXXX-2022 CODE-0261-2022 (Citywide) Page 7 C. Non-Residential Requirements 1. Commercial, Office, Service, Hotel, Retail, Industrial, and Institutional Uses. An applicant shall pay a commercial linkage fee based on the gross square footage of the non-residential space in accordance with Municipal Code Chapter 4.60. D. Mixed-Use Development Requirements 1. Dwelling Units & Commercial Space. For mixed-use development with five or more dwelling units, the inclusionary housing requirement is determined in accordance with subsection B of this Section for all dwelling units in addition to subsection C of this Section for all new commercial square footage within the development project. For example, a for-rent mixed-use project includes twenty (20) residential units and 5,000 square feet of commercial space: the inclusionary requirement would be two (2) affordable units (20 x 6% = 1.2 rounded to 2) and a commercial linkage fee would be applied to the 5,000 square feet of commercial space. 2. Commercial Space. For mixed-use development with four or less residential units, only the base inclusionary housing requirement for non-residential square footage shall be provided in accordance with subsection C of this Section. For example, a for-rent mixed- use project includes four (4) residential units and 5,000 square feet of commercial space: a commercial linkage fee would be applied to the 5,000 square feet of commercial space. E. Residential Final Maps or Parcel Maps 1. Residential Subdivisions. Tentative Maps as defined in Chapter 16.10 “Tentative Maps” of the Municipal Code, that result in five (5) or more residential lots or parcels, which do not include any associated or required development plan, and are intended for independent development, shall pay the In-Lieu Housing Fee (see Section 17.138.060: In-Lieu Housing Fee) at the time of building permit submittal. 17.138.050 – Standards for Inclusionary Units A. Standards. Inclusionary units must meet the following standards: 1. Inclusionary units shall be dispersed throughout the residential development projects to prevent a concentration of affordable units within the development project. 2. Inclusionary units shall be consistent with the design of market rate units in terms of exterior appearance, materials, and finished quality. 3. The applicant may reduce square footage of inclusionary units as compared to the market rate units as long as the minimum square footage of the affordable units are no less than seventy-five percent of the average size of all market rate units in the residential development project with the same bedroom count. For the purpose of this subsection, the “average size” of a unit with a certain bedroom count equals the total square footage of all market rate units with that bedroom count in the residential development project divided by the total number of market rate units with the same bedroom count in the residential development project. 4. For residential development projects with multiple market rate unit types containing differing numbers of bedrooms, inclusionary units shall be representative of the market rate unit mix. For example, a for sale, residential project includes fifty (50) dwelling units; ten (10) three-bedroom units, twenty (20) two-bedroom units, and twenty (20) one- bedroom units. To represent the units within the residential project, the five (5) required inclusionary units would be one (1) three-bedroom, two (2) two-bedrooms and two (2) one-bedrooms. Page 25 of 60 Planning Commission Resolution No. PC-XXXX-2022 CODE-0261-2022 (Citywide) Page 8 5. The required inclusionary units shall be constructed concurrently with market rate units, unless an alternative development schedule is otherwise stipulated by the applicable Review Authority of the residential development project. 6. Inclusionary units shall be subject to the City’s and/or the Administrator’s Fee Schedule in accordance with Section 17.138.110. 17.138.060 – In-Lieu Housing Fee A. Payment of In-Lieu Fee. The developer may, at their discretion, choose to pay a fee, as established by a resolution of the City Council, to the City in lieu of constructing affordable units to meet their inclusionary housing requirement. B. In-Lieu Fee Calculation. In-lieu fees shall be calculated using the total square footage of new, habitable square footage, as defined by California Building Code, included within the residential development project. Final Maps or Parcel Maps shall pay the In-Lieu Housing Fees consistent with Section 17.138.040E., C. Affordable Housing Fund. In-lieu fees shall be calculated using the new, habitable square footage, as defined by California Building Code, included within the residential development project. Final Maps or Parcel Maps in-lieu fees shall be calculated at time of individual lot development using the new, habitable square footage included within the residential development project. D. Timing. In-lieu fees shall be paid prior to building permit issuance. For projects constructed in phases, in-lieu fees shall be paid in the proportion that the phase bears to the overall project. 17.138.070 – Inclusionary Housing Plan A. Application Requirements. An applicant proposing a project for which inclusionary housing is required shall submit a statement with their planning application or building permit (whichever applies), describing the project’s inclusionary housing plan. The statement shall include: 1. A project description that includes details regarding the proposed residential development project such as, but not limited to total number of dwelling units, number of bedrooms per dwelling unit, square footage of all units (both residential and commercial), type of project (rental or ownership), etc.; 2. A description of the inclusionary housing plan for each construction phase, including the method chosen to meet the inclusionary housing requirement and including all of the following information including but not limited to: a. Whether the unit is for sale or rental; b. The number, location, unit type, tenure, number of bedrooms and baths, floor plan, construction schedule of all inclusionary units; c. Preliminary calculation of in-lieu fees or commercial linkage fee as applicable; d. Other information which the Director determines necessary to adequately evaluate the proposal. Page 26 of 60 Planning Commission Resolution No. PC-XXXX-2022 CODE-0261-2022 (Citywide) Page 9 17.138.080– Procedures A. Fractional Numbers. In determining the number of dwellings that are required to be built pursuant to Section 17.138.040.B fractional units shall be rounded up to the next higher whole number unit. If a project contains 10 units or less and the number of required inclusionary dwellings results in a fractional unit, an applicant may pay the in-lieu fee for the fractional unit or provide one Moderate affordable unit in the project. For example, a residential project proposes to construct six (6) dwelling units for rent. Per Sect ion 17.138.040, the project would have an inclusionary housing requirement of 0.36. The applicant may pay an in-lieu fee for the fractional amount or deed restrict one of the six (6) dwelling units for Moderate-income households. B. Affordable Housing Agreement. The applicant shall complete and sign an Affordable Housing Agreement. 1. Submittal of an Affordable Housing Agreement. Applicants of residential development projects subject to this Chapter shall submit an affordable housing agreement on forms provided by the City and pay a processing and recordation fee. 2. Timing. All building permits for inclusionary units in a residential development project shall be issued concurrently with, or prior to, issuance of building permits for the market rate units. 3. Construction Schedule. The inclusionary units shall be constructed concurrently with, or prior to, construction of the market rate units, unless otherwise stipulated by the applicable Review Authority of the residential development project. Occupancy permits and final inspections for inclusionary units in a residential development shall be approved concurrently with, or prior to, approval of occupancy permits and final inspections for the market rate units. 4. Review and Approval. The draft agreement shall be reviewed by the Director and City Attorney for compliance with project approvals, City policies and standards, and applicable codes. Following approval and signing of the agreement by the parties, the final agreement shall be recorded, and relevant terms and conditions shall be recorded as a deed restriction on those lots or affordable units subject to affordability requirements. The affordable housing agreement shall be binding to all future owners and successors in interest. 5. Term. The affordable housing agreement shall ensure that affordability is maintained for the longest period allowed or required by State law, but not less than 45 years for ownership and 55 years for rental. 6. Exemption for In-Lieu Fee Payment. An affordable housing agreement shall not be required for projects which meet their inclusionary housing requirement through the payment of in-lieu fees. 17.138.090 – Eligibility Requirements A. Program Requirement. Only households qualifying as extremely low-, very low-, low-, or moderate income, pursuant to the affordable housing standards, shall be eligible to rent, purchase, or occupy inclusionary units developed or funded in compliance with this requirement. For-sale inclusionary housing units shall be owner-occupied for the term of the affordable housing agreement. Page 27 of 60 Planning Commission Resolution No. PC-XXXX-2022 CODE-0261-2022 (Citywide) Page 10 B. Eligibility Screening. The City or an Administrator designated by the City shall screen prospective renters or buyers of affordable units. Buyers of affordable units shall enter into an agreement with the City. Occupants must be selected by means of an open, public process which ensures that individuals of a group of interested participants are selected in accordance with the City’s BMR Ownership and Rental Housing Guidelines. Private selection of individuals by project owners is not permitted for any affordable units. 17.138.100 – Shared Equity Purchase Program When a residential development project includes affordable housing units for sale in excess of the inclusionary housing requirement for the project, the additional units may be offered under the Shared Equity Purchase Program. A. Under this program, the qualified buyer of a designated affordable dwelling unit shall enter into a shared equity agreement with the City. Said agreement shall be recorded as a lien against the purchased property, at no interest, securing and stating the City’s equity share in the property. The City’s equity share shall be calculated by the Director, and shall be the decimal percentage of the property’s value resulting from: 1. The difference between the property’s market value and the actual price paid by the homeowner, divided by the market value; and/or, when applicable 2. The amount of subsidy provided by the City to the homeowner to purchase the property, divided by the property’s market value. B. Upon sale, the City’s equity share shall be repaid to the City from the proceeds of the sale, less the City’s percentage share of title insurance, escrow fees, and documentary transfer taxes, at the close of escrow. The proceeds from the sale shall be deposited into the City’s Affordable Housing Fund and shall be used for the purposes set forth in Health and Safety Code § 33334.2(e). C. In the event of “early resale,” owners of properties subject to the Shared Equity Purchase Program shall either: (1) pay an equity recapture fee to the City as described in the schedule below, in addition to the City’s equity share, or (2) sell the property to another eligible household. If the owner chooses to pay the equity recapture fee, the recapture fee shall be paid to the City upon resale at close of escrow, based on the following schedule: Table 8-1: Percent of Equity Build-up Recaptured Year % of Equity Build-up Recaptured 0 – 3 100% 4 75% + City’s Equity Share 5 50% + City’s Equity Share 6 25% + City’s Equity Share 7 and after 0% + City’s Equity Share The recapture amount shall be determined prior to the calculation of escrow closing costs. Page 28 of 60 Planning Commission Resolution No. PC-XXXX-2022 CODE-0261-2022 (Citywide) Page 11 17.138.110 –Administration, Management, and Monitoring Inclusionary rental and owner units shall be managed and operated by the property owner, or the owner’s agent, for the term of the affordable housing agreement. Sufficient documentation shall be submitted to ensure compliance with this Chapter, to the satisfaction of the Director. A. Duties of Program Administrator. The City may either handle in-house or contract for administration of the BMR Ownership Housing Program and monitoring compliance with the requirements of this Chapter to a program Administrator pursuant to an agreement executed between the City and the Administrator in accordance with the approved fee schedule. At a minimum, the Administrator shall perform the following services: 1. Maintain and administer the City’s BMR Ownership and Rental Housing Guidelines and Affordable Housing Standards. 2. Screen and select qualified buyers and renters according to the City’s Ownership and Rental Housing Guidelines and Affordable Housing Standards and maintain qualified owner and renter eligibility list; 3. Maintain a list of eligible mortgage lenders for financing the purchase of inclusionary units in accordance with the BMR Ownership Housing Guidelines; 4. Market new and vacant BMR for-sale and rental units within the City’s affordable housing inventory. 5. Monitoring compliance with terms and conditions of the occupancy and sale restrictions; 17.138.120 – Enforcement A. Enforcement. No final subdivision map shall be approved, nor building permit issued, nor shall any other development entitlement be granted for a residential development project subject to this Chapter that does not meet these requirements. No inclusionary unit shall be rented or sold except in accordance with these requirements and the affordable housing standards. Page 29 of 60 Page 30 of 60 O ____ ORDINANCE NO. _____ (2022 SERIES) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, APPROVING AN UPDATE TO THE CITY’S INCLUSIONARY HOUSING ORDINANCE OF THE MUNICIPAL CODE (CHAPTER 17.138) WITH AN EXEMPTION FROM ENVIRONMENTAL REVIEW (CEQA) WHEREAS, on January 5,1999, The City adopted its first Inclusionary Housing Ordinance contained in Ordinance No. 1346; and WHEREAS, on June 13, 2007, and update was made to the Inclusionary Housing Ordinance regarding resident selection process for inclusionary housing contained in Ordinance No. 1508; and WHEREAS, a Nexus Study was reviewed by Council on April 21,2020 to determine the feasibility of increasing the required amount of affordable housing in housing projects and implementing that into the City’s Inclusionary Housing Ordinance; and WHEREAS, the City Council of the City of San Luis Obispo conducted a web- based public hearing via teleconference on November 17, 2020, for the purpose of final adoption of the sixth cycle update to the General Plan Housing Element that included Program 2.13 that states, “Update the Inclusionary Housing Ordinance, including Table 2A, based on findings and recommendations in the 2020 Affordable Housing Nexus Study and conduct further feasibility analysis in order to evaluate the City’s ability to provide affordable housing in the proportions shown in the Regional Housing Needs Allocation, per Policy 2.4”; and WHEREAS, in April 2021, the City hired Economic & Planning Systems, Inc. (EPS) to conduct a feasibility analysis based on the findings and recommendations included in the Nexus Study and current market information and provide preliminary recommendations for updates to the City’s existing Inclusionary Housing Ordinance ; and WHEREAS, the State of California Office of Housing and Community Development, on September 3, 2021, certified the City of San Luis Obispo’s 6 th Cycle General Plan Housing Element as in full compliance with State Law; and WHEREAS, a Study Session was held by City Council on March 1, 2022, to review the preliminary recommendations of the feasibility analysis; and WHEREAS, on May 11, 2022, the City published a draft of the proposed amendments to Municipal Code Chapter 17.138 for public review; and Page 31 of 60 Ordinance No. ______ (2022 Series) Page 2 O _____ WHEREAS, the Planning Commission of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California on June 8, 2022, for the purpose of recommending amendments to implement programs of the 6th Cycle Housing Element by updating the Inclusionary Housing Ordinance; and WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California on ________, 2022, for the purpose of introducing an ordinance to repeal and replace Chapter 17.138 (Inclusionary Housing Requirements); and WHEREAS, notices of said public hearing were made at the time and in the manner required by law; and WHEREAS, the City Council has duly considered all evidence, including the testimony of the applicant, interested parties, and the evaluation and recommendations by staff, presented at said hearing. NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo as follows: SECTION 1. Findings. Based upon all the evidence, the City Council makes the following findings: 1. The proposed amendments to Title 17 of the Municipal Code are consistent with the 6th Cycle Housing Element Program 2.13 which states, “Update the Inclusionary Housing Ordinance, including Table 2A, based on findings and recommendations in the 2020 Affordable Housing Nexus Study and conduct further feasibility analysis in order to evaluate the City’s ability to provide affordable housing in the proportions shown in the Regional Housing Needs Allocation, per Policy 2.4.” 2. The proposed amendments to Title 17 of the Municipal Code are consistent with the 6th Cycle Housing Element Program 4.6 which states, “Amend the City’s Inclusionary Housing Ordinance to require that affordable units in a development be of similar size, number of bedrooms, character and basic quality as the non-restricted units in locations that avoid segregation of such units, including equivalent ways to satisfy the requirement. Also evaluate adjusting the City’s allowable sales prices for deed-restricted affordable units per a variety of unit types.” 3. The repeal and replacement of Chapter 17.138 of the Municipal Code for qualifying development projects will not alter the character of the City or cause health safety or welfare concerns because the amendment is consistent with the General Plan and directly implements City goals and policies. Page 32 of 60 Ordinance No. ______ (2022 Series) Page 3 O _____ SECTION 2. Environmental Determination. The proposed amendments to the Municipal Code Title have been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the state CEQA Guidelines, and the environmental regulations of the City. Specifically, the proposed amendments have been determined to be exempt from further environmental review pursuant to CEQA Guidelines Section 15061(b)(3), the “Common Sense” exemption, because the proposed actions will have no possibility of a significant effect on the environment and will not cause impacts. In this case, the proposed repeal and replacement of the Inclusionary Housing Ordinance is consistent with State Law and the City’s 6th Cycle Housing Element and will not have an significant effect and project specific environmental review will be required. SECTION 3. Action. The City Council hereby repeals and replaces, in its entirety, Chapter 17.138, entitled “Inclusionary Housing Requirements”, of the San Luis Obispo Municipal Code as set forth and incorporated herein. Chapter 17.138: Inclusionary Housing Requirements Sections: 17.138.010 – Purpose 17.138.020 – Applicability and Exclusions 17.138.030 – Definitions 17.138.040 – Inclusionary Housing Requirements 17.138.050 – Standards for Inclusionary Units 17.138.060 – In-Lieu Housing Fee 17.138.070 – Inclusionary Housing Proposal 17.138.080 – Procedures 17.138.090 – Eligibility Requirements 17.138.100 – Shared Equity Purchase Program 17.138.110 – Administration, Management, and Monitoring 17.138.120 – Enforcement 17.138.010 – Purpose The purpose and intent of this Chapter are: 1) to promote the public welfare by increasing the production and availability of affordable housing units; 2) to establish an inclusionary housing requirement which implements General Plan policies guiding land use and housing development; and 3) to ensure that affordable housing units established pursuant to the provisions of this Chapter are located in a manner that provides for their integration with market rate units. 17.138.020 – Applicability and Exclusions A. This Chapter shall apply to residential development projects consisting of five or more residential lots or new dwelling units. B. The following types of residential development projects are exempt: 1. Residential projects of four new units or less; Page 33 of 60 Ordinance No. ______ (2022 Series) Page 4 O _____ 2. Residential additions, repairs, or remodels, provided that such work does not increase the number of existing dwellings by five or more dwelling units; 3. The addition or inclusion of Accessory Dwelling Units associated with an existing or proposed residential or mixed-use development; 4. Affordable housing projects in which 100 percent of the dwellings to be built will be sold or rented in conformance with the City’s Affordable Housing Standards (excluding any on-site manager unit); 5. Housing projects that include a density bonus. 6. Emergency projects or projects which the Council determines are necessary to protect public health and safety; 7. Development projects which the Director determines are essentially noncommercial or nonresidential in nature, which provide educational, social, or related services to the community and which are proposed by public agencies, nonprofit agencies, foundations, and other similar organizations; 8. Projects which replace or restore a structure damaged or destroyed by fire, flood, earthquake, or other disaster within three years prior to the application for the new structure(s) (see Chapter 17.92 Nonconforming Structure). 17.138.030 – Definitions For the purposes of this Chapter, the following words and phrases shall have the meaning set forth below. For all other definitions, the provisions of Article 9 (Definitions) of this Title shall apply. A. “Administrator” means Below Market Rate Program Administrator which may either be the City itself or a third-party administrator acting as an agent for the City in connection with all aspects of the operation of the City's Below Market Rate program pursuant to an Agreement entered into between the City and the Administrator, as such agreement may be amended or replaced from time to time. B. “Affordable” means housing which can be purchased or rented by a household with very low-, low-, or moderate- income, as described in the City’s affordable housing standards. C. “Below Market Rate (BMR)” means that the affordability level of an inclusionary unit is below the cost of what a current market rate unit would be and is affordable to extremely low-, very low-, low-, or moderate-income households. D. “Borrower” shall be defined as one who meets the eligibility requirements for purchasing an inclusionary affordable unit. E. “Commercial Linkage Fee” means the fee paid by the applicant of commercial development projects to mitigate the impacts that such developments have on the demand for affordable housing in the City (see Municipal Code Chapter 4.60). F. “Density bonus” means a density increase over the maximum density otherwise allowable under the Zoning Regulations, Chapter 17.140. Page 34 of 60 Ordinance No. ______ (2022 Series) Page 5 O _____ G. “Early resale” shall mean the sale, lease, or transfer of property within seven years of the initial close of escrow for Equity Share Inclusionary Units. H. “Equity Share” shall mean the shared equity of appreciation between the City and the Borrower on inclusionary units when agreements specifically allow for affordable units to be sold at market-rate after a 7-year period. I. “Fee Schedule” means fees that for-sale and for-rent units are subject to and are paid to either the City or the Administrator for associated costs related to but not limited to eligibility screening, income verification, marketing of affordable units, and the close of escrow or completion of new lease agreements for affordable units. J. “Inclusionary housing unit” means a dwelling unit required under the provisions of this Chapter, and which meets the City’s affordable housing standards. K. “Low-” or “lower-income households” shall have the meaning set forth in Health and Safety Code Section 50079.5; provided the income of such persons and families shall not exceed 80 percent of the median income within the City as published and periodically updated by the State Department of Housing and Community Development. L. “Market rate” shall mean the highest price a willing buyer would pay and a willing seller would accept, both being fully informed and in an open market, as determined by an appraiser. M. “Moderate-income households” shall have the meaning set forth in Health and Safety Code Section 50079.5; provided the income of such persons and families exceed 80 percent but are less than or equal to 120 percent of the median income within the City as published and periodically updated by the State Department of Housing and Community Development. N. “Commercial development project” shall mean development projects which result in the subdivision of land and/or the construction or conversion of structures for the purpose of conducting business, including but not limited to retail sales, restaurants, offices, gas stations, manufacturing, etc. O. “Residential development project” shall mean development projects which result in the subdivision of land and/or the construction or conversion of structures, including, but not limited to, single-unit attached or detached homes, apartments, condominiums, live/work units, mixed-use, mobile homes, transitional housing or supportive housing, and group housing. P. “Very low-income” shall have the meaning set forth in Health and Safety Code Section 50079.5; provided the income of such persons and families shall not exceed 50 percent of the median income within the City as published and periodically updated by the State Department of Housing and Community Development. Page 35 of 60 Ordinance No. ______ (2022 Series) Page 6 O _____ 17.138.040 – Inclusionary Housing Requirements A. General Requirements. All non-exempt residential development projects shall include inclusionary units as required by this chapter. If the calculated number of units results in a fraction, the number shall be rounded as described in Section 17.138.080(A). 1. Construct the required number of inclusionary units for Residential or Mixed-Use projects; 2. Pay an in-lieu fee for Residential or Mixed-Use projects; or 3. Pay a commercial linkage fee (see Municipal Code Chapter 4.60) for new Non - Residential or Non-Residential portions of Mixed-Use project(s). B. Residential Requirements 1. Ownership Dwelling Units. Ten (10) percent of the dwelling units (see Section 17.138.080.A) shall be made available for sale to eligible households with five (5) percent for low-income households (fractional units may be rounded down to the next whole number) and five (5) percent for moderate -income households (fractional units may be rounded up to the next whole number). See Section 17.138.080.A for more information regarding fractional numbers. 2. Rental Dwelling Units. Six (6) percent of the dwelling units (see Section 17.138.080.A: Fractional Numbers) shall be made available for rent to eligible households with three (3) percent for very low-income households (fractional units may be rounded down to the next whole number) and three (3) percent for low-income households (fractional units may be rounded up to the next whole number). 3. In-Lieu Housing Fees. An applicant may pay in-lieu fees to the City rather than construct inclusionary units on site for residential projects that would create five (5) or more dwelling units or parcels (see Section 17.138.060: In -Lieu Housing Fee). C. Non-Residential Requirements 1. Commercial, Office, Service, Hotel, Retail, Industrial, and Institutional Uses. An applicant shall pay a commercial linkage fee based on the gross square footage of the non-residential space in accordance with Municipal Code Chapter 4.60. D. Mixed-Use Development Requirements 1. Dwelling Units & Commercial Space. For mixed-use development with five or more dwelling units, the inclusionary housing requirement is determined in accordance with subsection B of this Section for all dwelling units in addition to subsection C of this Section for all new commercial square footage within the development project. For example, a for-rent mixed-use project includes twenty (20) residential units and 5,000 square feet of commercial space: the inclusionary requirement would be two (2) affordable units (20 x 6% = 1.2 rounded to 2) and a commercial linkage fee would be applied to the 5,000 square feet of commercial space. Page 36 of 60 Ordinance No. ______ (2022 Series) Page 7 O _____ 2. Commercial Space. For mixed-use development with four or less residential units, only the base inclusionary housing requirement for non-residential square footage shall be provided in accordance with subsection C of this Section. For example, a for-rent mixed-use project includes four (4) residential units and 5,000 square feet of commercial space: a commercial linkage fee would be applied to the 5,000 square feet of commercial space. E. Residential Final Maps or Parcel Maps 1. Residential Subdivisions. Tentative Maps as defined in Chapter 16.10 “Tentative Maps” of the Municipal Code, that result in five (5) or more residential lots or parcels, which do not include any associated or required development plan, and are intended for independent development, shall pay the In -Lieu Housing Fee (see Section 17.138.060: In-Lieu Housing Fee) at the time of building permit submittal. 17.138.050 – Standards for Inclusionary Units A. Standards. Inclusionary units must meet the following standards: 1. Inclusionary units shall be dispersed throughout the residential development projects to prevent a concentration of affordable units within the development project. 2. Inclusionary units shall be consistent with the design of market rate units in terms of exterior appearance, materials, and finished quality. 3. The applicant may reduce square footage of inclusionary units as compared to the market rate units as long as the minimum square footage of the affordable units are no less than seventy-five percent of the average size of all market rate units in the residential development project with the same bedroom count. For the purpose of this subsection, the “average size” of a unit with a certain bedroom count equals the total square footage of all market rate units with that bedroom count in the residential development project divided by the total number of market rate units with the same bedroom count in the residential development project. 4. For residential development projects with multiple market rate unit types containing differing numbers of bedrooms, inclusionary units shall be representative of the market rate unit mix. For example, a for sale, residential project includes fifty (50) dwelling units; ten (10) three-bedroom units, twenty (20) two-bedroom units, and twenty (20) one-bedroom units. To represent the units within the residential project, the five (5) required inclusionary units would be one (1) three-bedroom, two (2) two-bedrooms and two (2) one-bedrooms. 5. The required inclusionary units shall be constructed concurrently with market rate units, unless an alternative development schedule is otherwise stipulated by the applicable Review Authority of the residential development project. 6. Inclusionary units shall be subject to the City’s and/or the Administrator’s Fee Schedule in accordance with Section 17.138.110. Page 37 of 60 Ordinance No. ______ (2022 Series) Page 8 O _____ 17.138.060 – In-Lieu Housing Fee A. Payment of In-Lieu Fee. The developer may, at their discretion, choose to pay a fee, as established by a resolution of the City Council, to the City in lieu of constructing affordable units to meet their inclusionary housing requirement. B. In-Lieu Fee Calculation. In-lieu fees shall be calculated using the new, habitable square footage, as defined by California Building Code, included within the residential development project. Final Maps or Parcel Maps in-lieu fees shall be calculated at time of individual lot development using the new, habitable square footage included within the residential development project. C. Affordable Housing Fund. All in-lieu fees collected shall be deposited into the Affordable Housing Fund. The fund shall be administered by the Finance Director and shall be used exclusively to provide funding for the provision of affordable housing and for reasonable costs associated with the development of affordable housing, at the discretion of the Council. D. Timing. In-lieu fees shall be paid prior to building permit issuance. For projects constructed in phases, in-lieu fees shall be paid in the proportion that the phase bears to the overall project. 17.138.070 – Inclusionary Housing Plan A. Application Requirements. An applicant proposing a project for which inclusionary housing is required shall submit a statement with their planning application or building permit (whichever applies), describing the project’s inclusionary housing plan. The statement shall include: 1. A project description that includes details regarding the proposed residential development project such as, but not limited to total numbe r of dwelling units, number of bedrooms per dwelling unit, square footage of all units (both residential and commercial), type of project (rental or ownership), etc.; 2. A description of the inclusionary housing plan for each construction phase, including the method chosen to meet the inclusionary housing requirement and including all of the following information including but not limited to: a. Whether the unit is for sale or rental; b. The number, location, unit type, tenure, number of bedrooms and baths, floor plan, construction schedule of all inclusionary units; c. Preliminary calculation of in-lieu fees or commercial linkage fee as applicable; d. Other information which the Director determines necessary to adequately evaluate the proposal. Page 38 of 60 Ordinance No. ______ (2022 Series) Page 9 O _____ 17.138.080– Procedures A. Fractional Numbers. In determining the number of dwellings that are required to be built pursuant to Section 17.138.040.B fractional units shall be rounded up to the next higher whole number unit. If a project contains 10 units or less and the number of required inclusionary dwellings results in a fractional unit, an applicant may pay the in-lieu fee for the fractional unit or provide one Moderate affordable unit in the project. For example, a residential project proposes to construct six (6) dwelling units for rent. Per Section 17.138.040, the project would have an inclusionary housing requirement of 0.36. The applicant may pay an in-lieu fee for the fractional amount or deed restrict one of the six (6) dwelling units for Moderate-income households. B. Affordable Housing Agreement. The applicant shall complete and sign an Affordable Housing Agreement. 1. Submittal of an Affordable Housing Agreement. Applicants of residential development projects subject to this Chapter shall submit an affordable housing agreement on forms provided by the City and pay a processing and recordation fee. 2. Timing. All building permits for inclusionary units in a residential development project shall be issued concurrently with, or prior to, issuance of building permits for the market rate units. 3. Construction Schedule. The inclusionary units shall be constructed concurrently with, or prior to, construction of the market rate units, unless otherwise stipulated by the applicable Review Authority of the residential development project. Occupancy permits and final inspections for inclusionary units in a residential development shall be approved concurrently with, or prior to, approval of occupancy permits and final inspections for the market rate units. 4. Review and Approval. The draft agreement shall be reviewed by the Director and City Attorney for compliance with project approvals, City policies and standards, and applicable codes. Following approval and signing of the agreement by the parties, the final agreement shall be recorded, and relevant terms and conditions shall be recorded as a deed restriction on those lots or affordable units subject to affordability requirements. The affordable housing agreement shall be binding to all future owners and successors in interest. 5. Term. The affordable housing agreement shall ensure that affordability is maintained for the longest period allowed or required by State law, but not less than 45 years for ownership and 55 years for rental. 6. Exemption for In-Lieu Fee Payment. An affordable housing agreement shall not be required for projects which meet their inclusionary housing requirement through the payment of in-lieu fees. Page 39 of 60 Ordinance No. ______ (2022 Series) Page 10 O _____ 17.138.090 – Eligibility Requirements A. Program Requirement. Only households qualifying as extremely low-, very low-, low- , or moderate income, pursuant to the affordable housing standards, shall be eligible to rent, purchase, or occupy inclusionary units developed or funded in compliance with this requirement. For-sale inclusionary housing units shall be owner-occupied for the term of the affordable housing agreement. B. Eligibility Screening. The City or an Administrator designated by the City shall screen prospective renters or buyers of affordable units. Buyers of affordable units shall enter into an agreement with the City. Occupants must be selected by means of an open, public process which ensures that individuals of a group of interested participants are selected in accordance with the City’s BMR Ownership and Rental Housing Guidelines. Private selection of individuals by project owners is not permitted for any affordable units. 17.138.100 – Shared Equity Purchase Program When a residential development project includes affordable housing units for sale in excess of the inclusionary housing requirement for the project, the additional unit s may be offered under the Shared Equity Purchase Program. A. Under this program, the qualified buyer of a designated affordable dwelling unit shall enter into a shared equity agreement with the City. Said agreement shall be recorded as a lien against the purchased property, at no interest, securing and stating the City’s equity share in the property. The City’s equity share shall be calculated by the Director, and shall be the decimal percentage of the property’s value resulting from: 1. The difference between the property’s market value and the actual price paid by the homeowner, divided by the market value; and/or, when applicable 2. The amount of subsidy provided by the City to the homeowner to purchase the property, divided by the property’s market value. B. Upon sale, the City’s equity share shall be repaid to the City from the proceeds of the sale, less the City’s percentage share of title insurance, escrow fees, and documentary transfer taxes, at the close of escrow. The proceeds from the sale shall be deposited into the City’s Affordable Housing Fund and shall be used for the purposes set forth in Health and Safety Code § 33334.2(e). C. In the event of “early resale,” owners of properties subject to the Shared Equity Purchase Program shall either: (1) pay an equity recapture fee to the City as described in the schedule below, in addition to the City’s equity share, or (2) sell the property to another eligible household. If the owner chooses to pay the equity recapture fee, the recapture fee shall be paid to the City upon resale at close of escrow, based on the following schedule: Page 40 of 60 Ordinance No. ______ (2022 Series) Page 11 O _____ Table 8-1: Percent of Equity Build-up Recaptured Year % of Equity Build-up Recaptured 0 – 3 100% 4 75% + City’s Equity Share 5 50% + City’s Equity Share 6 25% + City’s Equity Share 7 and after 0% + City’s Equity Share The recapture amount shall be determined prior to the calculation of escrow closing costs. 17.138.110 –Administration, Management, and Monitoring Inclusionary rental and owner units shall be managed and operated by the property owner, or the owner’s agent, for the term of the affordable housing agreement. Sufficient documentation shall be submitted to ensure compliance with this Chapter, to the satisfaction of the Director. A. Duties of Program Administrator. The City may either handle in-house or contract for administration of the BMR Ownership Housing Program and monitoring compliance with the requirements of this Chapter to a program Administrator pursuant to an agreement executed between the City and the Administrator in accordance with the approved fee schedule. At a minimum, the Administrator shall perform the following services: 1. Maintain and administer the City’s BMR Ownership and Rental Housing Guidelines and Affordable Housing Standards. 2. Screen and select qualified buyers and renters according to the City’s Ownership and Rental Housing Guidelines and Affordable Housing Standards and maintain qualified owner and renter eligibility list; 3. Maintain a list of eligible mortgage lenders for financing the purc hase of inclusionary units in accordance with the BMR Ownership Housing Guidelines; 4. Market new and vacant BMR for-sale and rental units within the City’s affordable housing inventory. 5. Monitoring compliance with terms and conditions of the occupancy and sal e restrictions; Page 41 of 60 Ordinance No. ______ (2022 Series) Page 12 O _____ 17.138.120 – Enforcement A. Enforcement. No final subdivision map shall be approved, nor building permit issued, nor shall any other development entitlement be granted for a residential development project subject to this Chapter that does not meet these requirements. No inclusionary unit shall be rented or sold except in accordance with these requirements and the affordable housing standards. INTRODUCED on the ___ day of _________, 2022, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the ___ day of ________, 2022, on the following vote: AYES: NOES: ABSENT: __________________________ Mayor Erica A. Stewart ATTEST: _________________________ Teresa Purrington, City Clerk APPROVED AS TO FORM: __________________________ J. Christine Dietrick, City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. __________________________ Teresa Purrington, City Clerk Page 42 of 60 R _____ RESOLUTION NO. _____ (2022 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AMENDING INCLUSIONARY HOUSING IN-LIEU FEES IN ACCORDANCE WITH CHAPTER 17.138 OF TITLE 17 AND ESTABLISHING THE AMOUNTS OF COMMERCIAL LINKAGE FEES IN ACCORDANCE WITH CHAPTER 4.60 OF TITLE 4 OF THE SAN LUIS OBISPO MUNICIPAL CODE AND AMENDING THE COMPREHENSIVE FEE SCHEDULE WHEREAS, the State of California has found that local governments have a responsibility to use the powers vested in them to facilitate the development of housing and to make adequate provision for the housing needs of all economic segments of the community (Government Code Section 65580(d); and WHEREAS, on August 16, 2022, the City Council of the City of San Luis Obispo adopted an ordinance amending inclusionary housing requirements, including inclusionary housing in-lieu fees, as codified in Chapter 17.138 of Title 17 of the San Luis Obispo Municipal Code (“Inclusionary Housing Ordinance”); and WHEREAS, on August 16, 2022, the City Council of the City of San Luis Obispo adopted an ordinance establishing a Commercial Linkage Fee on Non-Residential development as codified in Chapter 4.60 of Title 4 of the San Luis Obispo Municipal Code (the “Commercial Linkage Ordinance)”; and WHEREAS, the purpose and findings supporting the adoption of the Inclusionary Housing In-Lieu Fee are set forth in the Inclusionary Housing Ordinance; and WHEREAS, the purpose and findings supporting the adoption of the Commercial Linkage Fee are set forth in Commercial Linkage Fee Ordinance; and WHEREAS, the Council desires to establish herein the amount of the Inclusionary Housing In-Lieu Fees for residential development and Commercial Linkage Fees for specified non-residential land uses in the City; and WHEREAS, the Comprehensive Fee Schedule will be updated to reflect all new and updated fees; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of San Luis Obispo as follows: SECTION 1. Recitals. The recitals set forth above are hereby adopted as the findings of the City in adopting the policies herein. Page 43 of 60 Resolution No. ______ (2022 Series) Page 2 R _____ SECTION 2. Environmental Determination. Amending the inclusionary in-lieu housing fee and establishment of a commercial linkage fee is not considered a project subject to the California Environmental Quality Act (“CEQA”) pursuant to Section 15378(b)(4) of the CEQA Guidelines, which excludes the following from the definition of projects: the creation of a government funding mechanism or other government fiscal activities which do not involve any commitment to a specific project which may result in a potentially significant physical impact on the environment . SECTION 3. Inclusionary Housing In-Lieu Fee. Applicants opting to pay an inclusionary housing in-lieu fee in accordance with Chapter 17.138 of the San Luis Obispo Municipal Code shall pay the fee based on the habitable square footage of space within the residential development project as follows: Residential unit type Fee per square foot New for-sale housing $25.00 New rental housing $20.00 SECTION 4. Commercial Linkage Fee. The Commercial Linkage Fees adopted in Chapter 4.60 of the City of San Luis Obispo Municipal Code are hereby established in the following amounts and shall be computed as follows: All Commercial Development Projects and all Non- Residential portions of a project subject to Chapter 4.60 shall pay the commercial linkage fee based on the gross square footage of each use included in the proposed project as follows: Non-Residential Use Fee per square foot Office, Service, Retail, Hotel $6.00 Industrial, Manufacturing $5.00 Page 44 of 60 Resolution No. ______ (2022 Series) Page 3 R _____ SECTION 5. Effective Date. This Resolution shall take effect upon the effective date of both the Inclusionary Housing Ordinance and the Commercial Linkage Fee Ordinance. Upon motion of _________, seconded by __________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this ____ day of ________ 2022. ___________________________ Mayor Erica A. Stewart ATTEST: ______________________ Teresa Purrington City Clerk APPROVED AS TO FORM: ______________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. __________________________ Teresa Purrington City Clerk Page 45 of 60 Page 46 of 60 O _____ ORDINANCE NO. _____ (2022 SERIES) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AMENDING TITLE 4.60 OF THE CITY OF SAN LUIS OBISPO MUNICIPAL CODE TO ESTABLISH A COMMERCIAL LINKAGE FEE WITH AN EXEMPTION FROM ENVIRONMENTAL REVIEW (CEQA) WHEREAS, the City of San Luis Obispo (“City”) aims to provide sufficient levels of affordable housing for its residents; and WHEREAS, development of new commercial projects encourages new residents to move to the City, and some of the employees needed to meet the needs of new commercial development earn incomes only adequate to pay for affordable housing; and WHEREAS, because there is a need for additional affordable housing within the City, these employees might otherwise be forced to live in less-than-adequate housing within the City, pay a disproportionate share of their incomes to live in adequate housing within the City, or commute ever-increasing distances to their jobs from housing located outside of the City, thereby harming the City’s ability to attain goals articulated in the City’s General Plan; and WHEREAS, the City Council of the City of San Luis Obispo conducted a web - based public hearing via teleconference on November 17, 2020, for the purpose of final adoption of the sixth cycle update to the General Plan Housing Element that included Program 2.13, which provides, “Update the Inclusionary Housing Ordinance, including Table 2A, based on findings and recommendations in the 2020 Affordable Housing Nexus Study and conduct further feasibility analysis in order to evaluate the City’s ability to provide affordable housing in the proportions shown in the Regional Housing Needs Allocation, per Policy 2.4”; and WHEREAS, on April 21, 2020, City Council reviewed a Nexus Study prepared by David Paul Rosen and Associates (DRA) which confirmed that both market-rate residential and commercial development are creating demand for affordable housing that is not being met by the current housing market; and WHEREAS, pursuant to Government Code Section 66001, the Nexus Study establishes that there is a reasonable relationship between the commercial linkage fees and the commercial development on which it is imposed and between the need for affordable housing and the commercial development projects against which the fee is charged; and WHEREAS, in April 2021, the City hired Economic & Planning Systems, Inc. (EPS) to conduct a feasibility analysis of the City’s inclusionary housing requirements based on the findings and recommendations included in the Nexus Study; and Page 47 of 60 Ordinance No. ______ (Series 2022) Page 2 O _____ WHEREAS, the City may adopt and impose commercial linkage fees to mitigate the impact of commercial development projects on available affordable housing in the City under the authority of Sections 66000 et seq. of the California Government Code (“Mitigation Fee Act”); and WHEREAS, the commercial linkage fees will be placed in the City’s Affordable Housing Fund and the fees will be used solely to increase the supply of housing affordable to extremely low, very low, low, and moderate-income residents; and WHEREAS, the State of California Office of Housing and Community Development, on September 3, 2021, certified the City of San Luis Obispo’s 6 th Cycle General Plan Housing Element as in full compliance with State Law; and WHEREAS, a Study Session was held by City Council on March 1, 2022, to review staff’s recommended amendments to Chapter 17.138, that were derived from the Nexus Study and the EPS financial analysis; and WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California on July 19, 2022, for the purpose of introducing an ordinance to implement commercial linkage fees; and WHEREAS, notices of said public hearing were made at the time and in the manner required by law; and WHEREAS, the City Council has duly considered all evidence, including the testimony of the applicant, interested parties, and the evaluation and re commendations by staff. NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo as follows: SECTION 1. Findings. Based upon all the evidence, the City Council makes the following finding: 1. All recitals are true and correct and are incorporated herein by reference. 2. The proposed amendments to Title 4 are also consistent with the 6th Cycle Housing Element and implements program 2.13. SECTION 2. Environmental Determination. The proposed amendments to the Municipal Code Title have been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the state CEQA Guidelines, and the environmental regulations of the City. Sp ecifically, approval of fees and/or charges is not a “project” for the purposes of CEQA, pursuant to CEQA Guidelines, Section 15378(b)(4); and even if considered a “project” under CEQA, would be exempt from CEQA review pursuant to CEQA Guidelines Section 15061(b)(3), the “Common Sense” exemption, because the proposed ordinance will have no possibility of a significant effect on the environment and will not cause impacts. Page 48 of 60 Ordinance No. ______ (Series 2022) Page 3 O _____ SECTION 3. Action. The City Council hereby adds Chapter 4.60, entitled “Commercial Linkage Fees”, to the San Luis Obispo Municipal Code as set forth and incorporated herein. Chapter 4.60: Commercial Linkage Fees Sections: 4.60.010 – Purpose. 4.60-020 – Definitions. 4.60.030 – Fees to be set by resolution. 4.60.040 – Payment of fees. 4.60.050 – Exemptions. 4.60.060 – Disposition and use of fees. 5.60.070 - Enforcement 4.60.010 – Purpose A. Encourage the development and availability of housing affordable to a broad range of households with varying income levels within the city as mandated by State l aw, California Government Code Section 65580 and following. B. Offset the demand for affordable housing that is created by new development and mitigate environmental and other impacts that accompany new commercial development by protecting the economic diversity of the City’s housing stock; reducing traffic, transit and related air quality impacts by allowing more residents to live near their workplace; promoting jobs/housing balance; and reducing the demands placed on transportation infrastructure in the region. C. Promote the City’s policy to provide an adequate number of affordable housing units to the City’s housing stock in proportion to the existing or projected need in the community, as identified by the Housing Element. D. Support the Housing Element goal of assisting in the development of new housing that is affordable at all income levels and the policies and actions that support this goal. E. Encourage the production of the very low, low, and moderate income units planned for in the Housing Element of the General Plan. 4.60.020 - Definitions For the purposes of this Chapter, the following words and phrases shall have the meaning set forth below. A. “Administrator” means Below Market Rate Program Administrator which may either be the City itself or a third party administrator acting as an agent for the City in connection with all aspects of the operation of the City's Below Market Rate program pursuant to an Agreement entered into between the City and the Administrator, as such agreement may be amended or replaced from time to time. Page 49 of 60 Ordinance No. ______ (Series 2022) Page 4 O _____ B. “Affordable housing agreement” means a written agreement between a builder and the City as provided by Section 17.138.080.B. C. “Below Market Rate (BMR)” means that the affordability level of an inclusionary unit is below the cost of what a current market rate unit would be and is affordable to extremely low-, very low-, low-, or moderate-income households. D. “Commercial development project” shall mean development projects which result in the subdivision of land and/or the construction or conversion of structures for the purpose of conducting business, including but not limited to hotels, retail sales, restaurants, offices, gas stations, research and development uses and manufacturing. E. “Commercial linkage fee” means the fee paid by applicant of commercial development projects to mitigate the impacts that such developments have on the demand for affordable housing in the City. F. “First approval” means the first discretionary approval to occur with respect to a commercial development project or, for commercial projects not requiring a discretionary approval, the issuance of a building permit. G. “Inclusionary housing plan” means a plan for a residential development project submitted by an applicant as provided by Section 17.138.070. H. “Planning permit” means any discretionary approval of a residential or mixed use project, including but not limited to a comprehensive or specific plan adoption or amendment, rezoning, tentative map, parcel map, conditional use permit, variances, or architectural review. 4.60.030 – Fees to be Set by Resolution The amount of commercial linkage fee imposed on applicants of commercial development projects shall be determined by resolution adopted by the City Council and may be adjusted annually by the percentage change in the Consumer Price Index for all Urban Consumers (CPI-U). Commercial linkage fees shall not exceed the cost of mitigating the impact of the commercial development projects on the availability of affordable housing in the city. 4.60.040 – Payment of Fees A. A commercial linkage shall be applied to commercial development projects involving new construction and additional gross square footage to existing commercial buildings. If a development is exempt from the fee at initial construction, but later converts to a commercial development project, the converted square footage will be subject to the fee. B. Any commercial linkage fee shall be paid in full prior to the issuance of the first building permit for the commercial development project subject to the fee or at a time otherwise specified by Council Resolution. If no building permit is required, the fee shall be paid before a conversion of use may take place. The fee shall be calculated based on the fee schedule in effect at the time the building permit is issued as adopted by the City Council. Page 50 of 60 Ordinance No. ______ (Series 2022) Page 5 O _____ 4.60.050 – Exemptions A. The following commercial projects are exempt from the provisions of this chapter. 1. City buildings and facilities and those public facilities entitled to an exemption under state law. 2. Schools, places of public assembly, cultural institutions, childcare facilities, nursing homes, residential care facilities, and skilled nursing facilities. 3. Projects which replace or restore a structure damaged or destroyed by fire, flood, earthquake, or other disaster within three years prior to the application for the new structure(s) (see Chapter 17.92 Nonconforming Structure). 4.60.060 – Disposition and Use of Fees Commercial linkage fees collected shall be deposited into the Affordable Housing Fund. The fund shall be administered by the Finance Director and shall be used exclusively to provide funding for the provision of affordable housing and for reasonable costs associated with the development of affordable housing, at the discretion of the Council. 4.60.070 – Enforcement A. Payment of the commercial linkage fee is the obligation of the builder of a commercial development project. The City may institute any appropriate legal actions or proceedings necessary to ensure compliance herewith, including, but not limited to, actions to revoke, deny, or suspend any permit or development approval. B. The City Attorney and Community Development Director shall be authorized to enforce the provisions of this chapter and all affordable housing agreements, regulatory agreements, by civil action and any other proceeding or method permitted by law. C. Failure of any official or agency to fulfill the requirements of this chapter shall not excuse any builder or owner from the requirements of this chapter. No permit, license, map, or other approval or entitlement for a commercial development project shall be issued, including without limitation a final inspection or certificate of occupancy, until all applicable requirements of this chapter have been satisfied. Page 51 of 60 Ordinance No. ______ (Series 2022) Page 6 O _____ D. The remedies provided for in this chapter shall be cumulative and not exclusive and shall not preclude the City from any other remedy or relieve to which it otherwise would be entitled under law or equity. INTRODUCED on the ___ day of _________, 2022, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the ___ day of ________, 2022, on the following vote: AYES: NOES: ABSENT: __________________________ Mayor Erica A. Stewart ATTEST: _________________________ Teresa Purrington, City Clerk APPROVED AS TO FORM: __________________________ J. Christine Dietrick, City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. __________________________ Teresa Purrington, City Clerk Page 52 of 60 CITY OF SAN LUIS OBISPO Title 17 – ZONING REGULATIONS DRAFT Chapter 17.138: Inclusionary Housing Requirements Sections: 17.138.010 – Purpose 17.138.020 – Applicability and Exclusions 17.138.030 – Definitions 17.138.040 – Inclusionary Housing Requirements 17.138.050 – Standards for Inclusionary Units 17.138.060 – In-Lieu Housing Fee 17.138.070 – Inclusionary Housing Proposal 17.138.080 – Procedures 17.138.090 – Eligibility Requirements 17.138.100 – Shared Equity Purchase Program 17.138.110 – Administration, Management, and Monitoring 17.138.120 – Enforcement 17.138.010 – Purpose The purpose and intent of this Chapter are: 1) to promote the public welfare by increasing the production and availability of affordable housing units; 2) to establish an inclusionary housing requirement which implements General Plan policies guiding land use and housing development; and 3) to ensure that affordable housing units established pursuant to the provisions of this Chapter are located in a manner that provides for their integration with market rate units. 17.138.020 – Applicability and Exclusions A. This Chapter shall apply to residential development projects consisting of five or more residential lots or new dwelling units. B. The following types of residential development projects are exempt: 1. Residential projects of four new units or less; 2. Residential additions, repairs, or remodels, provided that such work does not increase the number of existing dwellings by five or more dwelling units; 3. The addition or inclusion of Accessory Dwelling Units associated with an existing or proposed residential or mixed-use development; 4. Affordable housing projects in which 100 percent of the dwellings to be built will be sold or rented in conformance with the City’s Affordable Housing Standards (excluding any on-site manager unit); 5. Housing projects that include a density bonus. 6. Emergency projects or projects which the Council determines are necessary to protect public health and safety; 7. Development projects which the Director determines are essentially noncommercial or nonresidential in nature, which provide educational, social, or related services to the community and which are proposed by public agencies, nonprofit agencies, foundations, and other similar organizations; Deleted: General Standards Deleted: Procedures Deleted: Affordable Deleted: Fund Established Deleted: Real Property Dedication Deleted: Incentives Deleted: Project Application¶ 17.138.110 – Required Agreements¶ 17.138.120 – Program Requirements¶ 17.138.130 – Eligibility Screening¶ 17.138.140 – Affordability Restrictions¶ 17.138.150 – Deleted: 17.138.160 – Early Resale of Shared Equity Properties¶ 17.138.170 – Deleted: 180 Deleted: and Appeals Deleted: 17.138.190 – Severability¶ ¶ Deleted: Deleted: rental Deleted: Deleted: development Deleted: , and to commercial development projects consisting of 2,500 square feet or more of gross floor area Deleted: excluded Deleted: developments Deleted: <#>New commercial developments of less than 2,500 square feet of gross floor area;¶ Deleted: <#>and commercial building Deleted: <#>four Deleted: <#> or result in an increase in commercial gross floor area of 2,500 square feet or more Deleted: <#>The conversion of less than five dwelling units to condominiums within any five -year period;¶ 5. Deleted: <#>Commercial condominium conversions which do not result in the creation of new dwellings Deleted: <#>; Deleted: a Deleted: h Deleted: s Page 53 of 60 CITY OF SAN LUIS OBISPO Title 17 – ZONING REGULATIONS DRAFT 8. Projects which replace or restore a structure damaged or destroyed by fire, flood, earthquake, or other disaster within three years prior to the application for the new structure(s) (see Chapter 17.92 Nonconforming Structure ); 17.138.030 – Definitions For the purposes of this Chapter, the following words and phrases shall have the meaning set forth below. For all other definitions, the provisions of Article 9 (Definitions) of this Title shall apply. A. “Administrator” means Below Market Rate Program Administrator which may either be the City itself or a third-party administrator acting as an agent for the City in connection with all aspects of the operation of the City's Below Market Rate program pursuan t to an Agreement entered into between the City and the Administrator, as such agreement may be amended or replaced from time to time. B. “Affordable” means housing which can be purchased or rented by a household with very low-, low-, or moderate- income, as described in the City’s affordable housing standards. C. “Below Market Rate (BMR)” means that the affordability level of an inclusionary unit is below the cost of what a current market rate unit would be and is affordable to extremely low-, very low-, low-, or moderate-income households. D. “Borrower” shall be defined as one who meets the eligibility requirements for purchasing an inclusionary affordable unit. E. “Commercial Linkage Fee” means the fee paid by the applicant of commercial development projects to mitigate the impacts that such developments have on the demand for affordable housing in the City (see Municipal Code Chapter 4.60). F. “Density bonus” means a density increase over the maximum density otherwise allowable under the Zoning Regulations, Chapter 17.140. G. “Early resale” shall mean the sale, lease, or transfer of property within seven years of the initial close of escrow for Equity Share Inclusionary Units. H. “Equity Share” shall mean the shared equity of appreciation between the City and the Borrower on inclusionary units when agreements specifically allow for affordable units to be sold at market-rate after a 7-year period. I. “Fee Schedule” means fees that for-sale and for-rent units are subject to and are paid to either the City or the Administrator for associated costs related to but not limited to eligibility screening, income verification, marketing of affordable units, and the close of escrow or completion of new lease agreements for affordable units. J. “Inclusionary housing unit” means a dwelling unit required under the provisions of this Chapter, and which meets the City’s affordable housing standards. K. “Low-” or “lower-income households” shall have the meaning set forth in Health and Safety Code Section 50079.5; provided the income of such persons and families shall not exceed 80 percent of the median income within the City as published and periodically updated by the State Department of Housing and Community Development. Deleted: <#>Projects for which an approved tentative map or vesting tentative map exists, or for which a construction permit was issued prior to the effective date of the ordinance codified in this Chapter and the permittee has performed substantial work and incurred substantial liabilities and which continue to have unexpired permits. ¶ Deleted: Deleted: <#>“Building valuation” shall mean the total value of all construction work for which a construction permit is required, as determined by the Chief Building Official using the Uniform Building Code.¶ Deleted: <#>“Development project” shall mean an activity for which a subdivision map or constructionbuilding permit is required, including new buildings and building additions or remodels, but not including changes in ownership, occupancy, management, or use. ¶ Deleted: <#>“Expansion area” means a land area proposed for annexation to the City or annexed after the adoption date of the ordinance codified in this Chapter.¶ “Housing Authority” refers to the Housing of Authority of San Luis Obispo (HASLO). ¶ Deleted: which is built Deleted: County Page 54 of 60 CITY OF SAN LUIS OBISPO Title 17 – ZONING REGULATIONS DRAFT L. “Market rate” shall mean the highest price a willing buyer would pay and a willing seller would accept, both being fully informed and in an open market, as determined by an appraiser. M. “Moderate-income households” shall have the meaning set forth in Health and Safety Code Section 50079.5; provided the income of such persons and families exceed 80 percent but are less than or equal to 120 percent of the median income within the City as published and periodically updated by the State Department of Housing and Community Development. N. “ Commercial development project” shall mean development projects which result in the subdivision of land and/or the construction or conversion of structures for the purpose of conducting business, including but not limited to retail sales, restaurants, offices, gas stations, manufacturing, etc. O. “Residential development project” shall mean development projects which result in the subdivision of land and/or the construction or conversion of structures, including, but not limited to, single-unit attached or detached homes, apartments, condominiums, live/work units, mixed-use, mobile homes, transitional housing or supportive housing, and group housing. P. “Very low-income” shall have the meaning set forth in Health and Safety Code Section 50079.5; provided the income of such persons and families shall not exceed 50 percent of the median income within the City as published and periodically updated by the State Department of Housing and Community Development . 17.138.040 – Inclusionary Housing Requirements A. General Requirements. All non-exempt residential development projects shall include inclusionary units as required by this chapter. If the calculated number of units results in a fraction, the number shall be rounded as described in Section 17.138.080(A).. 1. Construct the required number of inclusionary units for Residential or Mixed-Use projects; 2. Pay an in-lieu fee for Residential or Mixed-Use projects; or 3. Pay a commercial linkage fee (see Municipal Code Chapter 4.60) for new Non- Residential or Non-Residential portions of Mixed-Use project(s). B. Residential Requirements 1. Ownership Dwelling Units. Ten (10) percent of the dwelling units (see Section 17.138.080.A) shall be made available for sale to eligible households with five (5) percent for low-income households (fractional units may be rounded down to the next whole number) and five (5) percent for moderate-income households (fractional units may be rounded up to the next whole number). See Section 17.138.080.A for more information regarding fractional numbers. 2. Rental Dwelling Units. Six (6) percent of the dwelling units (see Section 17.138.080.A: Fractional Numbers) shall be made available for rent to eligible households with three (3) percent for very low-income households (fractional units may be rounded down to the next whole number) and three (3) percent for low- income households (fractional units may be rounded up to the next whole number). Deleted: value Deleted: fully informed and in an open market, as determined by an appraiser or other qualified professional. Deleted: include those Deleted: whose incomes Deleted: County Deleted: <#>“Real property” shall mean land and improvements, if any, including anything permanently affixed to the land, such as buildings, walls, fences, and paved areas.¶ Deleted: <#>Non-residentia Deleted: <#>l Deleted: dwellings Deleted: studios Deleted: 50105, defined as “ Deleted: whose incomes do Deleted: the qualifying limits for very low-income families as established and amended from time to time in compliance with Section 8 Deleted: United States Housing Act of 1937, and Deleted: in the California Administrative Code.” Deleted: General Standards Deleted: ¶ A. Methods of Meeting Requirements. New development projects shall satisfy the inclusionary housing requirements, as specified in Tables 2 and 2A of the General Plan Housing Element (also included below) which require that all nonexempt development projects shall contribute toward the production of affordable housing by constructing at least one affordable dwelling unit or paying an in-lieu fee. To meet the requirements, the developer shall comply with one or more of the following methods: Deleted: 1. Deleted: section Deleted: : Fractional Numbers, unless otherwise specified Deleted: affordable dwelling units, as specified in Table 2 of the Housing Element, as adjusted by Table 2A of the Housing Element; or Deleted: 2. Pay an in-lieu fee as described in Table 2, as adjusted by Table 2A. For development projects in which the adjustment factor under Table 2A equals zero (“0”), the minimum adjustment factor shall be 0.25 (resulting in a minimum in-lieu fee of 1.25 percent of the building valuation for development projects and commercial developments in expansion areas, and 3.75 percent of building ... Deleted: 56: Development Impact Fees Deleted: : Fractional Numbers Deleted: (Fractional Numbers) Page 55 of 60 CITY OF SAN LUIS OBISPO Title 17 – ZONING REGULATIONS DRAFT 3. In-Lieu Housing Fees. An applicant may pay in-lieu fees to the City rather than construct inclusionary units on site for residential projects that would create five (5) or more dwelling units or parcels (see Section 17.138.060: In-Lieu Housing Fee). C. Non-Residential Requirements 1. Commercial, Office, Service, Hotel, Retail, Industrial, and Institutional Uses. An applicant shall pay a commercial linkage fee based on the gross square footage of the non-residential space in accordance with Municipal Code Chapter 4.60. D. Mixed-Use Development Requirements 1. Dwelling Units & Commercial Space. For mixed-use development with five or more dwelling units, the inclusionary housing requirement is determined in accordance with subsection B of this Section for all dwelling units in addition to subsection C of this Section for all new commercial square footage within the development project. For example, a for-rent mixed-use project includes twenty (20) residential units and 5,000 square feet of commercial space : the inclusionary requirement would be two (2) affordable units (20 x 6% = 1.2 rounded to 2) and a commercial linkage fee would be applied to the 5,000 square feet of commercial space. 2. Commercial Space. For mixed-use development with four or less residential units, only the base inclusionary housing requirement for non-residential square footage shall be provided in accordance with subsection C of this Section. For example, a for-rent mixed-use project includes four (4) residential units and 5,000 square feet of commercial space: a commercial linkage fee would be applied to the 5,000 square feet of commercial space. E. Residential Final Maps or Parcel Maps 1. Residential Subdivisions. Tentative Maps as defined in Chapter 16.10 “Tentative Maps” of the Municipal Code, that result in five (5) or more residential lots or parcels, which do not include any associated or required development plan, and are intended for independent development, shall pay the In-Lieu Housing Fee (see Section 17.138.060: In-Lieu Housing Fee) at the time of building permit submittal. 17.138.050 – Standards for Inclusionary Units A. Standards. Inclusionary units must meet the following standards: 1. Inclusionary units shall be dispersed throughout the residential development projects to prevent a concentration of affordable units within the development project. 2. Inclusionary units shall be consistent with the design of market rate units in terms of exterior appearance, materials, and finished quality. 3. The applicant may reduce square footage of inclusionary units as compared to the market rate units as long as the minimum square footage of the affordab le units are no less than seventy-five percent of the average size of all market rate units in the residential development project with the same bedroom count. For the purpose of this subsection, the “average size” of a unit with a certain bedroom count eq uals the total square footage of all market rate units with that bedroom count in the residential development project divided by the total number of market rate units Deleted: within the development project that result in an increase in gross floor area of 2,500 s quare feet Deleted: C. Deleted: Projects Deleted: Non-Residential Deleted: projects Deleted: dwellings Deleted: or 2,500 square feet or more of new non- residential square footage Deleted: by: (1) using Table 2 to calculate the base inclusionary requirement for the commercial use, and (2) using Table 2A to adjust the base requirement based on project density and average unit size, as described in Deleted: (B) of this Section. Deleted: times the commercial linkage fee Deleted: Non-Residential Deleted: projects Deleted: fewer than five dwellings, the base inclusionary housing requirement for the commercial use shall apply Deleted: inclusionary requirement would only be Deleted: times the commercial linkage fee Deleted: s Deleted: to the City Deleted: or mixed-use Page 56 of 60 CITY OF SAN LUIS OBISPO Title 17 – ZONING REGULATIONS DRAFT with the same bedroom count in the residential development project. 4. For residential development projects with multiple market rate unit types containing differing numbers of bedrooms, inclusionary units shall be representative of the market rate unit mix. For example, a for sale, residential project includes fifty (50) dwelling units; ten (10) three-bedroom units, twenty (20) two-bedroom units, and twenty (20) one-bedroom units. To represent the units within the residential project, the five (5) required inclusionary units would be one (1) three-bedroom, two (2) two-bedrooms and two (2) one-bedrooms. 5. The required inclusionary units shall be constructed concurrently with market rate units, unless an alternative development schedule is otherwise stipulated by the applicable Review Authority of the residential development project. 6. Inclusionary units shall be subject to the City’s and/or the Administrator’s Fee Schedule in accordance with Section 17.138.110. 17.138.060 – In-Lieu Housing Fee A. Payment of In-Lieu Fee. The developer may, at their discretion, choose to pay a fee, as established by a resolution of the City Council, to the City in lieu of constructing affordable units to meet their inclusionary housing requirement. B. In-Lieu Fee Calculation. In-lieu fees shall be calculated using the total square footage of new, habitable square footage, as defined by California Building Code, included within the residential development project. In-lieu fees shall be calculated using the new, habitable square footage, as defined by California Building Code, included within the residential development project. Final Maps or Parcel Maps in-lieu fees shall be calculated at time of individual lot development using the new, habitable square footage included within the residential development project . , C. Affordable Housing Fund . All in-lieu fees collected shall be deposited into the Affordable Housing Fund. The fund shall be administered by the Finance Director and shall be used exclusively to provide funding for the provision of affordable housing and for reasonable costs associated with the development of affordable housing, at the discretion of the Council. D. Timing. In-lieu fees shall be paid prior to building permit issuance. For projects constructed in phases, in-lieu fees shall be paid in the proportion that the phase bears to the overall project. 17.138.070 – Inclusionary Housing Plan A. Application Requirements. An applicant proposing a project for which inclusionary housing is required shall submit a statement with their planning application or building permit (whichever applies), describing the project’s inclusionary housing plan. The statement shall include: 1. A project description that includes details regarding the proposed residential development project such as, but not limited to total number of dwelling units, number of bedrooms per dwelling unit, square footage of all units (both residential and commercial), type of project (rental or ownership), etc.; Deleted: D. Timing. The inclusionary housing requirement shall be met prior to issuance of a certificate of occupancy for the first unit in a building, or the first building in a complex to be constructed or remodeled; or for subdivisions, prior to Final Map approval; or prior to building permit issuance, for projects for which a certificate of occupancy is not issued; or as otherwise agreed to by the Director as part of tentative map, rezoning, Minor Use Permit, Conditional Use Permit, or other development approval.¶ E. Affordable Housing Agreement. To meet the requirement, the developer may enter into an agreement with the City, the Housing Authority of San Luis Obispo (HASLO), nonprofit housing provider, or other qualified housing provider approved by the Director to construct, refurbish, convert, operate, and maintain the required affordable housing. Such affordable housing agreements shall be to the approval of the Director and shall be in a form approved by the City Attorney. ¶ Deleted: A. Deleted: his or her Deleted: dwellings Deleted: this Deleted: B. Amount and Method of Payment. The dollar amount and method of payment of the in -lieu ... Deleted: In-lieu fees for Final Maps or Parcel Maps which are subject to Inclusionary Housing ... Deleted: Timing. In-lieu fees shall be paid prior to ... Deleted: Establi Deleted: shed¶ The City hereby establishes an Deleted: In-lieu fees collected shall be deposited into the Affordable Housing Fund, to the satisfaction of the ... Deleted: ¶ Deleted: release of occupancy of the first dwelling within a residential development; or for residential ... Deleted: A. Irrevocable Offer to Dedicate Real ... Deleted: 17.138.100 – Project Deleted: ¶ A. Method of Application. Deleted: /developer Deleted: affordable Deleted: the standard Deleted: , Deleted: proposal Deleted: developer’s Deleted: 1. Deleted: brief Deleted: of the proposal Page 57 of 60 CITY OF SAN LUIS OBISPO Title 17 – ZONING REGULATIONS DRAFT 2. A description of the inclusionary housing plan for each construction phase, including the method chosen to meet the inclusionary housing requirement and including all of the following information including but not limited to: a. Whether the unit is for sale or rental; b. The number, location, unit type, tenure, number of bedrooms and baths, floor plan, construction schedule of all inclusionary units; c. Preliminary calculation of in-lieu fees or commercial linkage fee as applicable; d. Other information which the Director determines necessary to adequately evaluate the proposal. 17.138.080– Procedures A. Fractional Numbers. In determining the number of dwellings that are required to be built pursuant to Section 17.138.040.B fractional units shall be rounded up to the next higher whole number unit. If a project contains 10 units or less and the number of required inclusionary dwellings results in a fractional unit, an applicant may pay the in- lieu fee for the fractional unit or provide one Moderate affordable unit in the project. For example, a residential project proposes to construct six (6) dwelling units for rent. Per Section 17.138.040, the project would have an inclusionary housing requirement of 0.36. The applicant may pay an in-lieu fee for the fractional amount or deed restrict one of the six (6) dwelling units for Moderate-income households. B. Affordable Housing Agreement. The applicant shall complete and sign an Affordable Housing Agreement. 1. Submittal of an Affordable Housing Agreement. Applicants of residential development projects subject to this Chapter shall submit an affordable housing agreement on forms provided by the City and pay a processing and recordation fee. 2. Timing. All building permits for inclusionary units in a residential development project shall be issued concurrently with, or prior to, issuance of building permits for the market rate units. 3. Construction Schedule. The inclusionary units shall be constructed concurrently with, or prior to, construction of the market rate units, unless otherwise stipulated by the applicable Review Authority of the residential development project. Occupancy permits and final inspections for inclusionary units in a residential development shall be approved concurrently with, or prior to, approval of occupancy permits and final inspections for the market rate units. 4. Review and Approval. The draft agreement shall be reviewed by the Director and City Attorney for compliance with project approvals, City policies and standards, and applicable codes. Following approval and signing of the agreement by the parties, the final agreement shall be recorded, and relevant terms and conditions shall be recorded as a deed restriction on those lots or affordable units subject to affordability requirements. The affordable housing agreement shall be binding to all future owners and successors in interest. 5. Term. The affordable housing agreement shall ensure that affordability is maintained for the longest period allowed or required by State law, but not less Deleted: ; Deleted: type and Deleted: of affordable Deleted: term of affordability; preliminary Deleted: ; or offer of land dedication Deleted: 2. How the proposal meets General Plan policies and inclusionary housing requirements;¶ 3. Plans and other exhibits showing preliminary site layout, grading, building elevations, parking and other site features, location of affordable dwelling units, and (where applicable) market value dwelling units;¶ 4. Description of incentives requested, including exceptions from development standards, density bonuses, fee waivers or other incentives; and¶ 5. Deleted: , including but not limited to the method proposed to award occupancy of the affordable units Deleted: 110 Deleted: Deleted: Required Agreements Deleted: Table 2, Deleted: A. Deleted: and developers for Deleted: , as a condition of development approval, Deleted: , or final recordation of a final or parcel map, whichever occurs first Deleted: B. Page 58 of 60 CITY OF SAN LUIS OBISPO Title 17 – ZONING REGULATIONS DRAFT than 45 years for ownership and 55 years for rental. 6. Exemption for In-Lieu Fee Payment. An affordable housing agreement shall not be required for projects which meet their inclusionary housing requirement through the payment of in-lieu fees. 17.138.090 – Eligibility Requirements A. Program Requirement. Only households qualifying as extremely low-, very low-, low-, or moderate income, pursuant to the affordable housing standards, shall be eligible to rent, purchase, or occupy inclusionary units developed or funded in compliance with this requirement. For-sale inclusionary housing units shall be owner-occupied for the term of the affordable housing agreement. B. Eligibility Screening. The City or an Administrator designated by the City shall screen prospective renters or buyers of affordable units. Buyers of affordable units shall enter into an agreement with the City. Occupants must be selected by means of an open, public process which ensures that individuals of a group of interested participants are selected in accordance with the City’s BMR Ownership and Rental Housing Guidelines. Private selection of individuals by project owners is not permitted for any affordable units. 17.138.100 – Shared Equity Purchase Program When a residential development project includes affordable housing units for sale in excess of the inclusionary housing requirement for the project, the additional units may be offered under the Shared Equity Purchase Program. A. Under this program, the qualified buyer of a designated affordable dwelling unit shall enter into a shared equity agreement with the City. Said agreement shall be recorded as a lien against the purchased property, at no interest, securing and stating the City’s equity share in the property. The City’s equity share shall be calculated by the Director, and shall be the decimal percentage of the property’s value resulting from: 1. The difference between the property’s market value and the actual price paid by the homeowner, divided by the market value; and/or, when applicable 2. The amount of subsidy provided by the City to the homeowner to purchase the property, divided by the property’s market value. B. Upon sale, the City’s equity share shall be repaid to the City from the proceeds of the sale, less the City’s percentage share of title insurance, escrow fees, and documentary transfer taxes, at the close of escrow. The proceeds from the sale shall be deposited into the City’s Affordable Housing Fund and shall be used for the purposes set forth in Health and Safety Code § 33334.2(e). C. In the event of “early resale,” owners of properties subject to the Shared Equity Purchase Program shall either: (1) pay an equity recapture fee to the City as described in the schedule below, in addition to the City’s equity share, or (2) sell the property to another eligible household. If the owner chooses to pay the equity recapture fee, the recapture fee shall be paid to the City upon resale at close of escrow, bas ed on the following schedule: Deleted: s Deleted: 120 – Deleted: Deleted: 17.138.130 – ¶ Deleted: Housing Authority Deleted: other housing provider Deleted: Renters or b Deleted: have equal probability of selection. Deleted: Deleted: 17.138.140 – Affordability Restrictions¶ Developers of affordable units for sale shall specify the type of affordability restriction to be applied. The developer shall choose to either: (1) participate in a shared equity purchase program , as described in Section 17.138.150, or (2) enter into an affordable housing agreement to ensure that affordability is maintained for the longest period allowed or required by State law. ¶ 17.138.150 Deleted: 17.138.160 – Early Resale of Shared Equity Properties¶ Deleted: shared equity purchase program Deleted: “Early resale” shall mean the sale, lease, or transfer of property within seven years of the initial close of escrow. … Page 59 of 60 CITY OF SAN LUIS OBISPO Title 17 – ZONING REGULATIONS DRAFT Table 8-1: Percent of Equity Build-up Recaptured Year % of Equity Build-up Recaptured 0 – 3 100% 4 75% + City’s Equity Share 5 50% + City’s Equity Share 6 25% + City’s Equity Share 7 and after 0% + City’s Equity Share The recapture amount shall be determined prior to the calculation of escrow closing costs. 17.138.110 –Administration, Management, and Monitoring Inclusionary rental and owner units shall be managed and operated by the property owner, or the owner’s agent, for the term of the affordable housing agreement. Sufficient documentation shall be submitted to ensure compliance with this Chapter, to the satisfaction of the Director. A. Duties of Program Administrator. The City may either handle in-house or contract for administration of the BMR Ownership Housing Program and monitoring compliance with the requirements of this Chapter to a program Administrator pursuant to an agreement executed between the City and the Administrator in accordance with the approved fee schedule. At a minimum, the Administrator shall perform the following services: 1. Maintain and administer the City’s BMR Ownership and Rental Housing Guidelines and Affordable Housing Standards. 2. Screen and select qualified buyers and renters according to the City’s Ownership and Rental Housing Guidelines and Affordable Housing Standards and maintain qualified owner and renter eligibility list; 3. Maintain a list of eligible mortgage lenders for financing the purchase of inclusionary units in accordance with the BMR Ownership Housing Guidelines; 4. Market new and vacant BMR for-sale and rental units within the City’s affordable housing inventory. 5. Monitoring compliance with terms and conditions of the occupancy and sale restrictions; 17.138.120 – Enforcement A. Enforcement. No final subdivision map shall be approved, nor building permit issued, nor shall any other development entitlement be granted for a residential development project subject to this Chapter that does not meet these requirements. No inclusionary unit shall be rented or sold except in accordance with these requirements and the affordable housing standards. Deleted: 170 Deleted: 180 Deleted: and Appeals Deleted: which Deleted: B. Appeals. The Director shall administer and interpret these requirements, subject to applicable codes and City procedures. Decisions of the Director are appealable, subject to the Zoning Regulations Chapter 17.126 (Appeals). ¶ 17.138.190 – Severability¶ If any provision of this Chapter or the application thereof to any person or circumstances is held invalid, the remainder of the Chapter and the application of the provision to other persons or situations shall not be affected thereby. Page 60 of 60