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HomeMy WebLinkAboutMINUTES - 07082008 - C.112 Contra . TO: BOARD OF SUPERVISORS %=_ 4 •. Costa FROM: INTERNAL OPERATIONS COMMITTEE DATE: JUNE 9, 2008 A-poor CO U my SUBJECT: FEASIBILITY OF INCLUDING THE HOME OWNERSHIP PARTNERSHIP PROGRAM AS AN ALTERNATIVE METHOD OF COMPLYING WITH THE INCLUSIONARY HOUSING ORDINANCE SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUS'HFICATION _ RECOMMENDATIONS: 1. DETERMINE that many elements of the Home.Ownership Partnership Enterprise (HOPE) Program are, in some form, already available to developers. Further determine that the only element that could be considered as an alternative compliance option to the IHO is the payment of fees in lieu of developing affordable housing. 2. ACKNOWLEDGE staffs conclusion that the HOPE proposal for fees would not generate the equivalent fee revenue to be considered as an equivalent benefit to developing affordable housing. 3. RECALL that the Board has directed Conservation and Development Department staff to develop and suggest alternative.methods to calculate the in-lieu fee to the Board for discussion in the fall. 4. Therefore, ABANDON the proposal to include aspects of the HOPE Program in the Inclusionary Housing Ordinance and REMOVE this item as a referral to the Internal Operations Committee. CONTINUED ON ATTAC HMENT: SIGNATURIE- ----------------------------------------------------------------------------------------- -- - - ----------- E --- - - - - RI n4MENDA"PION Of COLJNTY ADMINIS'1'RA"TOR // REC'OMMI NDAT N F BOA.ItI.)COMMITTEE AI'I'R0VI: OTHER SIGNATU'RE(S): SUSAN A. BONILLA,CHAIR GAYLE ILkEMA ------------------------------------------- ----------------- --------- --- - ------------ --- ------------ ACTION OF BOARD ON J 0 PROVE AS RECOMMENDED�_ VOT E OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRIJE AND CORRECT COPY OF AN ACTION TAKEN AND FN fERED UNANIMOUS(ABSENT ) ON THE MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN AYES: NOES: ATTESTED: JULY 8,2008 ABSENT: ABSTAIN: JOHN CULL F CLERK OF THE BOARD OF SUPERVIS AND OUNIPKADMINISTRATOR CONTACT: JULIE ENEA(9?5)335-1077 BY ;�' DEPUTY CC: INTERNAL OPERATIONS COMMITTEE STAFF CONSERVATION AND DEVELOPMENT DIRECTOR REDEVELOPMENT DIRECTOR HOPE Program/Inclusionary Housing Ordinance ,lune 9,2008 Internal Operations Committee Page 2 BACKGROUND: On October 10, 2006 the Board of Supervisors considered the Home Ownership Partnership Enterprise (HOPE Program) and the adoption.of an Inclusionary Housing Ordinance (IHO). The Board referred the HOPE Program to the Internal Operations Committee to consider the feasibility of developing the HOPE Program to a point where it can be included in the County's IHO as an approved alternative method of meeting the requirements of the IHO. The IHO considered this item at its April 16, 2007 meeting, but did not make a recommendation to the Board of Supervisors at that time. The IHO was a Board of Supervisors initiative to require developers of new residential projects with 5 or more units to provide 15 percent of the units as affordable to very-low, lower, and moderate income households. The IHO provides the following alternative compliance options: • payment of fees in lieu of developing affordable units • development of the affordable units on a separate site • developer conveyance of land suitable for affordable housing development to a qualified affordable housing developer • another reasonable alternative proposed by the developer In order to consider anything an alternative compliance option under the IHO, it needs to have at least an equivalent benefit to building the affordable units in the development with the market rate units. The HOPE program does not provide any equivalent options. The Board and the IO instructed staff to develop the MOPE Program to a point where it could be considered an option. The only aspect of the HOPE Program that could be modified in such a way is the payment of fees. The other aspects of the HOPE Program are financing and incentives-related, and are more suited for impact mitigation than compliance options. The Board has already directed staff to bring to the Board alternative methodologies for determining the amount of the in-lieu fee. Staff expects to return to the Board late this fall with those alternative methodologies. The HOPE Program proposal of$3,000 per unit could be brought to the Board for consideration; however, staff is not recommending this. There is no rationale or methodology to substantiate the HOPE amount. In addition, it is not sufficient to provide an equivalent benefit to-the direct development of affordable housing. The HOPE Program was developed by Planning Commissioner Murray to foster the development of affordable housing. The following list summarizes the contents of the HOPE program. After each item is a statement regarding the feasibility of including.the.proposal into.the 11-10. A. Fees: Developers would pay a fee of$3,000 for each unit in a new development. This is called a unit purchase". This is applicable to any residential development of one or more units. This fee could be modified to be a fee in lieu of development of affordable housing. However, it is much too low to be considered as an equivalent benefit to developing affordable housing. The IHO allows fees to be paid in lieu of developing affordable housing units for projects with at least 5 and no more than 125 units. The current fee is $25,555 per market rate unit. HOPE Program/Inclusionary Housing Ordinance June 9,2008 Internal Operations Committee Page 3 B. Tax increment.financing nancing districts (TIF): New TIFs would be established for each property sold or rented to an income-eligible household. Future TIF revenues would be used to support bond financing, which would bring revenue into the program more quickly than waiting for the TIF to be paid over time. This financing mechanism cannot be modified in any way for inclusion in the IHO. The County's redevelopment areas are TIFs. Twenty percent of the tax increment is required to be spent on affordable housing. The State Constitution only permits TIFs in blighted areas determined to be redevelopment areas. The County has historically opposed the expansion of TIFs into non-redevelopment settings due to tax concerns. C. Fee suspension: Planning, building; and special district fees associated with an affordable unit would be suspended until the unit is no longer part of the program. Fees would be paid by the homeowner when the home is sold or by the owner of an apartment building when the teen of affordability expires. Fee suspension is provided to developers to mitigate the economic impacts of building affordable housing. Fee suspension cannot be considered as an alternative compliance measure. Pursuant to AB 641 (Government Code Section 66007), the State requires local jurisdictions to defer payment of fees during construction of affordable housing. The fees are due at certification of occupancy. The County has no control over special district fees. Furthermore, impact fees are set based on an analysis of infrastructure needs and costs. Exempting units from impact fees creates shortfalls in the infrastructure plan of finance. The shortfall could require a reassignment of the costs. which then creates nexus and proportionality issues. D. Densi/v bonuses: Density bonuses are provided to developers to mitigate the economic impacts of building affordable housing. The IHO provides a density bonus of 15 percent when 15 percent of a residential development is set aside for affordable housing. The County also has a density bonus ordinance that provides density increases beyond the IHO when a developer agrees to provide additional affordable units. Density bonuses are not compliance options. E. Realtor contributions: Realtors would be asked to contribute one percent of their sales commission. The County cannot mandate realtor contributions for affordable housing development. Experience from the Housing Trust Fund Initiative suggests that a voluntary program would have limited effect. Developers could negotiate a beneficial agreement with realtors without County involvement. Finally, the IHO already includes language that allows the County to consider any reasonable alternative to developing affordable housing on site. A reasonable alternative must provide an equivalent benefit to providing affordable housing on-site.