Report Prepared by: Scott McBride, Director of Development Services
Title
SUBJECT: Report on Pro-Housing Policies, Housing Production, Affordable Housing and Request for City Council Direction on Policies, Programs, and Other Actions
REPORT IN BRIEF
Report on Pro-Housing Policies, Housing Production Affordable Housing and Receive City Council Direction on Policies, Programs, and other Actions.
RECOMMENDATION
City Council - Adopt a motion:
A. Accepting the report on pro-housing policies, housing production, affordable housing; and,
B. Provide direction to staff on potential policies, programs, and actions in support of housing production and affordable housing.
Body
ALTERNATIVES
1. Approve, as recommended by Staff; or,
2. Approve, subject to conditions other than recommended by Staff (identify specific findings and/or conditions amended to be addressed in the motion); or,
3. Deny; or,
4. Continue to a future meeting (date and time to be specified in the motion).
AUTHORITY
Merced City Charter, Section 200.
CITY COUNCIL PRIORITIES
Fiscal Year 2021/22 Adopted Goals & Priorities, 4. Housing & Homelessness, ii. Policy Direction.
DISCUSSION
Background
The City Council was previously provided with two presentations related to Affordable Housing Resources and Affordable Housing Tools. Those were provided at the April 5th and April 19th meetings. Staff was provided direction at those meetings which include the following:
Housing Resources, April 5, 2021
• Funding swap of HUD 108 Loan Guarantee funds to Community Development Block Grant Program Income Funds (CDBG PI) for the Childs and B Project
• Direction to proceed with utilizing Housing Successor Agency Funds for the Gateway Terrace II project
Affordable Housing Tools, April 19, 2021
• Provide additional options to consider in support of housing production and affordable housing
Current Affordable Housing Projects
Childs and B Project - the City Council has recently taken action to amend the Disposition and Development Agreement and various loan documents - regulatory agreements to implement the Childs and B funding change. That change was a switch of HUD 108 Loan Guarantee funding to Community Development Block Grant (CDBG) Program Income in the amount of $2.0 million. Construction is underway and ahead of schedule.
Gateway Terrace II - Staff is currently working with the Central Valley Coalition for Affordable Housing to outline the various documents that will be necessary for the change in funding approach related to Gateway Terrace II. Staff has also been coordinating with the Department of Housing and Urban Development (HUD) on the specific mechanics of repayment of the previously expended HUD funding, CDBG and HOME.
April 19th Council Meeting
In response to the April 19th Council Direction Staff has prepared this administrative report and attached presentation. The April 19th meeting included information and community input on Inclusionary Zoning as well as other potential tools or activities that may assist in housing production or affordability. They included the following:
• Commercial Linkage Fee
• Market Rate Affordable Housing Fee
• Identification of additional subsidy
• Diversify Housing Partners - Housing RFQ
• Affordable by Design
• Countywide Housing Consortium
Additional Affordable Housing Activities
In support of Affordable Housing since the last report was provided to the City Council in April 2021 some additional activities have been completed or initiated. They include the following:
• Housing Partner RFQ
• Received responses from five qualified firms
• Several are pursuing site acquisition and land use entitlements - cumulatively over 600 affordable units
• Working on project Pro Forma - financial needs
• Funding requests to be discussed on a project-by-project basis
• Infill Housing Request for Proposals - Housing Successor Agency properties
• Received three response from qualified firms
• Council consideration to enter into site disposition negotiations
It should be noted that the State of California Housing and Community Development Department (HCD) is drafting a Notice of Funding Availability of all their various funding programs into one “Super NOFA.” The anticipated release is early 2022. To receive consideration a site must be under control, owned or an option to purchase. Additionally, having land use entitlements in place provides for higher scoring.
Administrative Report and Presentation Goals
• Provide comprehensive data points related to housing in the City of Merced
• Outline Entitlement process and current policies
• Identify policies, processes, and programs where the City Council can influence housing production and investment:
– Time to produce units
– Costs related to producing the unit
• Potential Pro-Housing Designation by the State of California
Evaluation of Data and Studies
To identify additional ways the City of Merced can advance housing production and affordable housing, staff has sought data sources to assist in identifying current housing issues and needs. The data provided includes the following:
• Annual Data - State Department of Finance
• Annual City Data and Studies - annual sources including Housing Element Annual Report, General Plan Annual Report, Housing and Urban Development (HUD) Annual Action Plan, and Consolidated Annual Performance Evaluation Report (CAPER), and City permit data
• Recurring City Studies - Housing Element, Consolidated Plan, Regional Housing Needs Assessment, and Municipal Service Reviews prepared by Merced County LAFCO
• Other Data including the Census
• Other Studies including State Auditor, Health Impact Assessment by Merced County Public Health on the UC Merced LRDP, Merced County Board of Realtors - California Realtors Association, Continuum of Care - Point in time Count
It should be noted that the City currently has over 2,700 approved multi family or apartment units. There are additionally over 1,700 approved Tentative Map Lots. These are typically single-family home arranged lots. This is the approval status before a Final Map is submitted. The Tentative Map lots do not include sections in Bellevue Ranch North which are currently under large lot maps. Those areas may provide an additional 1,700 plus units in a variety of configurations. Additionally, the City is receiving Annexation Pre-Applications for additional areas that may support both single family and multi-family development.
Over the past 10-year period, the City has issued 2,441 single-family building permits and 678 multi-family building permits.
Conclusions from the data and studies include the following:
• Action is needed to increase the supply of housing given the low vacancy rate - Health Assessment
• Action is needed to support affordable housing - population is rent burdened - Health Assessment & State Auditor
• There is a need for shelter - supportive services to assist those experiencing homelessness, approximately 214 units - COC Data
• City and partners are producing units at a high rate, but an additional 500 to 600 are needed in the marketplace to help stabilize availability - Real Estate Data
• UC Merced will need off campus housing for approximately half of the annual increase of 530 students per year, 265 students per year - 2017 and 2020 LRDP
• The City is producing affordable housing units, but more are needed - State Auditor
City Housing Support and Funding
The City has some direct areas of service in support of housing production. Examples include the Development Services Department which includes the Planning and Inspection Service Divisions. These two divisions are involved in the project entitlements, environmental or CEQA review, building plan review, and building inspections. Support is also provided by other departments through the entitlement and construction phases. An example is the Engineering Division which is involved in the processing of maps, review of improvement plans, and construction of subdivision and public improvements. Once completed all city departments provide some type of service to the housing unit and residents.
In addition to development support the Housing Division also provides support utilizing entitlement allocation funding form the Department of Housing and Urban Development (HUD) and other funding sources. These funding sources are typically tied to income qualifications and eligible census tracts. These funds augment other sources from project developers to assist making the project meet specific affordability standards. It should be noted that HUD funding is provided under two sources, Community Development Block Grant (CDBG) and Home Investment Partnership (HOME). CDBG may be utilized on some certain housing activity and public services and public improvements. HOME provides more flexibly in support of affordable housing, but also has a specific allocation which must be made to a Community Housing Development Organization (CHDO). The City only has one established CHDO the Central Valley Coalition for Affordable Housing.
Over the past ten years the Housing Division, utilizing HUD sources as well as Neighborhood Stabilization, Cal Home, State Home, and Housing Successor Agency - former Redevelopment Low- and Moderate-Income Funds has committed the following:
• Housing Activities - $19,792,210
• Public Services - $1,134,708 (CDBG)
• Infrastructure - Capital Improvements $1,481,078 (CDBG)
These funding programs do not include one-time funds received under the special Allocation for COVID 19 relief. The City pledged use of a portion of those funds for Emergency Rental and Utility Assistance.
Under two rounds of allocation the City made $186,005 available followed by an additional $432,327. The City has two service providers implementing these programs. Anyone in need of assistance should contact them to determine eligibility. Their contact numbers are:
Sierra Saving Grace - 209-626-5660
Merced Salvation Army - 209-383-4225
In addition to the City’s allocation Merced County received funding for these activities. Their funding can be used in any jurisdiction within the County. Remaining funds are approximately $30 million. Action was recently taken for implementation directly by the State of California.
The County’s program provided this update - Beginning on August 11, 2021, all new applications for rental and/or utility assistance not already scheduled with CVOC will need to be submitted to the CA COVID-19 Rent Relief Program <https://housing.ca.gov/covid_rr/index.html>. For additional information, including eligibility and application help, you can call the State's COVID-19 Rent Relief Call Center at 1-833-430-2122.
Permitting - Land Use Entitlements
The City’s primary role in providing housing is in the areas of Permitting and Land Use Entitlements. Permitting occurs after entitlements are in place. They are typically ministerial in nature. Examples include Plan Checks of building plans and issuance of a building permit. Another example is review of improvement plans for a new subdivision. To help in these areas the City utilities a combination of contact and staff plan checkers as well as engineers. The City also allows for the use of Master Plans which allow a builder to use the same building plans in multiple locations without the need for plans to be reviewed for each permit application.
The area of land Use Entitlements is generally coordinated by the City’s Planning Division. They may include processing of a General Plan Amendment, Zone Change, formation of a Planned Development, a Conditional Use Permit, and Tentative Subdivision Map. These types of actions not discretionary and require consideration by the Planning Commission or some cases the Commission as a recommending body with the City Council as an approving body. These various types of approvals are all subject to the California Environmental Quality Act or CEQA. The actions may be a Resolution or Ordinance depending on the City’s General Plan and Zoning requirements.
There are however several examples within the City’s Zoning Code which allows for “By Right” development to occur. This avoids the need for action by the Commission or Council and greatly accelerates the ability to review and approve a proposed development. The State has long been pushing for more By Right approvals for housing projects.
Housing Influences
There are many factors which affect the supply of housing units and production of units. Some include the following:
• Population Growth - Economic Conditions
• Changing population characteristics - income, age, family size
• UC Merced student growth and program growth
• Homelessness
• New Conditions - migration from more urban areas, teleworking, future transportation investments (ACE and HSR)
Evaluation of Policies, Procedures, and Processes
To assist in evaluating ways to help encourage and expedite housing production considerable work has also been done in identifying policies contained within the General Plan and other Municipal Code Sections that should be considered for modification. These tools can also support increased housing production including affordable housing. They include the following:
General Plan
• Establish a Density for Residential Development in Commercial GP Areas
• Current policy supports mixed use, but does not provide a residential or mixed-use maximum density
• Create more flexible standards for Subdivision Improvements - part width streets and special road sections for example
Housing Element
• New development to provide a plan for housing production in line with City’s Regional Housing Needs Assessment (RHNA) requirements
• This may be a potential alternative to an Inclusionary Zoning Ordinance
• Merced County has incorporated a requirement as part of new Specific and Community Plans
• The City may implement this requirement as part of various discretionary entitlements
• Annexation requests,
• General Plan Amendments
• Zone Changes
• May be implemented using Legislative Action Agreement, Development Agreement (DA) or Pre-Annexation Development Agreement (PADA) mechanisms already in use
Mapping - Subdivision
• Expedite - Streamline the approval process for Tentative Maps and Final Maps
• Deposit and Reimbursement Agreements - consider policy deferring to the City Manager up to a specified dollar amount
• Delegate Final Map and Acceptance of Improvements to the City Engineer
• Subdivision Agreement - defer approval to the City Manager
• Update Title 18 - match the Map Act as much as possible
• Pre-Qualified List of Consultants to assist Engineering Division - already in progress
• The City has a Local Early Planning Grant (LEAP) from HCD that can assist
CEQA - Environmental
• Update Title 19 of the Municipal Code - many CEQA updates
• Deposit and Reimbursement Agreements - Consider policy deferring to the City Manager up to a specified dollar amount
• Vehicle Miles Traveled Guidelines (VMT) - Support Merced County Association of Governments (MCAG) creation of a local model and guidelines - adopt as a General Plan Amendment
• Update General Plan and Zoning to create more By Right entitlements
• Abandon Programmatic Climate Action Plan (PCAP) - as currently prepared may hinder housing development, duplicates other new state requirements
Zoning Code Updates
• Reduce steps - streamline procedures
• Create more By Right entitlements - Affordable by Design
• Use of Objective Standards
• Update standards to take into consideration new housing types - choices
• Updates for consistency with state laws
• Updates for Supportive Services
• City has a LEAP and SB2 Grant to assist
Specific Zoning Updates include the following
Streamlining & Flexibility
• Add for the ability to utilize non-PD Zoning Standards when none were approved for the PD - lot size, setbacks, building heights as examples
• Reduce the size requirement to create a Residential Plan Development Area - currently 1 acre
• Clearly specify that the PD may have different standards from both single family and multifamily design guidelines and other standards
• Consider changes to the Interface Requirements including eliminating the Site Plan Requirement when a project is consistent with the General Plan, underlying Zoning, and is a residential project (20.32)
Supportive Housing
• Density Bonus (20.56) - State updates include AB 2162 - Supportive Housing
• By Right Location of Emergency Shelters (20.10.20) - expand from CG to CT and CC
• Group/Transitional/Supportive (20.08-1) Housing and Residential Care Facilities - non state licensed and no services provided
• Consider expanding Single Room Occupancy in specified residential zones and commercial zones (20.144.120)
In Fill - Affordable by Design
• Reduce the requirement to utilize Small Lot Design Standards (20.40) from a Conditional Use Permit (CUP) to a Site Plan
• Pre-Qualify or Designate areas as qualifying for Urban Residential Overlay Zone (20.22.040) - Opportunity Zone for example
• By Right Duplexes in Single Family Zones (20.08.020(B)) - currently only on corner lots on larger roadways - all residential zones and residential PD’s
• By Right or Streamlined Administrative approval for Tri-Plex units in Single Family Zones and residential PD’s
• SB 35 - update application and add Objective Design Standards
Promote Housing Choices and Affordability
• Create Tiny Home Standards and designate zones for by right or other streamlined administrative approval
• Update Single Family Design Standards (20.46.020) - roof pitch and width
• Update Multifamily Design Standards General and Specific (20.46.030 & 20.46.040)
• Allow Roof Mounted A/C Units when screened
• Eliminate setback requirements that are more stringent than underlying zone
• Allow for exceptions - modification through a PD
• Add Mixed Use Development Standards - address densities in commercial zones where housing is allowed (20.20.10)
• Consider Updates to the Definition of Lot - alley facing and other access easement options
• Remove the requirement to process a Condominium Map by way of a Conditional Use Permit (CUP) (20.54.030)
• Update Parking Requirements for Multi Family (20.38) - does not promote mixed use - impacts reuse of existing buildings
Financial
• Community Facilities District Policy Update (CFD)
• Streamline procedures to establish - annex
• Identify which project types are not subject to CFD
• Public Facility Impact Fees (PFFP)
• Deferral Options - Multi Family fees are not currently eligible
• Multi phased projects are not currently addressed
• Change security from property based to a bond
• Establish a reduced Infill Rate - Opportunity Zone, update underway
• Developer Financial Tool Kit
• Expand and educate on BOLD, SCIP, Opportunity Zone, consider use of EIFD, other State Grants and Programs
To assist in these updates, the City has some tools available including two grants awarded to the City by the State Department of Housing and Community Development. They include the following:
• Local Early Action Planning Grant (LEAP)
• Funding to prepare updates to the General Plan and Zoning Code - Objective Standards, by right, up zoning, streamlining
• Funding to amend the Subdivision - Map Ordinance
• Funding to review Development Review Processes and Fees
• Funding to Establish Pro Housing Policies - seek HCD approval - evaluate a Housing Trust Fund
• SB2 Planning Grant
• ADU & JADU Ordinance Update
• Off the Shelf ADU Plan
• Off the Shelf Duplex/Triplex Plan
• Tiny Home Ordinance - Zoning
• Infill and Overlay in the Downtown Area
Regional Early Action Planning Grant - MCAG
MCAG has received REAP 1 and will receive REAP 2 funding. REAP 1 is focused on technical assistance - REAP 2 can also fund housing programs and projects.
A Housing Workgroup has been formed and is providing input to the Technical Review Board (TRB) and Governing Board. The Workgroup has several recommendations related to the use of the REAP 1 allocation:
• Completion of Regional Housing Needs Assessment (RHNA)
• Evaluation of a multi-jurisdictional Housing Element or independent
• Preparation of Housing Element(s)
• Evaluation of Housing Consortium and Housing Trust
A Housing Trust or Housing Trust Fund is an organization and financial tool to provide affordable housing. They can be a single agency, multiple agencies, or nonprofit organization. A dedicated funding source is often created to provide resources. An example is commercial linkage fee - an impact fee levied on nonresidential development projects.
A Housing Consortium is a potential tool to also assist in affordable housing production. They goal of forming an agency of this type is to leverage HUD funding similar to the City’s allocation. These sources can be used by other agencies that do not currently receive funding in support of affordable housing and other eligible activities. Stanislaus County has several jurisdictions that have formed a consortium.
Policy Recommendations
• Begin General Plan and Zoning Updates
• Integrate RHNA Policy for unit distribution, with Development Agreements or Legislative Action Agreement delineation
• Required to comply with new State Legislation
• Streamline entitlement processes to reduce time from application to construction
• Provide enhanced ministerial and By Right entitlement opportunity
• General Plan and Zoning updates that encourage affordable by design and income type across all areas
• Enhanced City Programs
• Develop and expand Financial Toolkit for PFFP
• Re-invest program income into 1st Time Home Buyer Program
• Create CEQA support to assist with regional review and mitigation needs
Pro-Housing Policies
The State of California Housing and Community Development Department (HCD) has created an application process for a local agency to be considered as a Pro Housing Community. Although not competitive, the process does require that the local agency act in many ways to encourage by right development and various other methods to encourage housing productions and affordability. Some benefits of being designated include:
• Support exploration of Regional Housing partnership within County
• Provide funding sources and technical assistance to all agencies
• Recommend adoption of a Regional Housing Element
• Seek Pro Housing Designation by the State Housing and Community Development Department (HCD)
• Access to additional financial resources to affordable housing projects
• Provides additional points on competitive funding applications
• Continue Fair Housing Support through HUD allocation
• Continue Continuum of Care Support through HUD Allocation
Next Steps
Fall 2021
• Housing Successor Agency Property Disposition Direction - Scattered Sites RFP
• Funding Commitments to Affordable Housing RFQ Partners
• ARPA Public Input - Council Direction
• Gateway Terrace II Funding Approval and Agreements
• Acceptance of SB2 and LEAP Grants - budget amendments
• HUD CAPER
Winter 2021-22
• Housing RFQ Partners Tax Credit and State Funding Applications
• RFQ’s for SB2 and LEAP Implementation
• HUD Annual Plan Process - Public Hearings and Community Outreach
• Home Key Grant applications
Spring 2022
• Childs and B on Site Construction Completion
• HUD Projects and Program Funding RFQ - Housing and Community Services
• SB2 and LEAP Contracts
IMPACT ON CITY RESOURCES
None
ATTACHMENTS
1. Presentation on Pro Housing Policies, Housing Production, and Affordable Housing