TO: ADAM PIRRIE, CITY MANAGER
FROM: BRAD JOHNSON, COMMUNITY DEVELOPMENT DIRECTOR
DATE: JULY 9, 2024
Reviewed by:
City Manager: AP
SUBJECT:
Title
CONSIDERATION OF PHASING THE INCLUSIONARY HOUSING ORDINANCE IN-LIEU FEE (FUNDING SOURCE: GENERAL FUND)
Body
SUMMARY
On May 23, 2023, the City Council adopted Resolution 2023-33, which increased the fee payment cost methodology for inclusionary housing in-lieu fee requests. At the time of adoption, housing development applicants with submitted applications were unaware the increased in-lieu fee would apply to their projects.
Staff recommends that the City Council phase the Inclusionary Housing Ordinance (IHO) in-lieu fee formula for development applications submitted prior to the 2023 modified formula.
RECOMMENDATION
Recommended Action
Staff recommends the City Council adopt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CLAREMONT, CALIFORNIA, AMENDING CITY COUNCIL RESOLUTION NO. 2023-33 UPDATING THE FEE SCHEDULE FOR THE INCLUSIONARY HOUSING IN-LIEU FEE PURSUANT TO CHAPTER 16.036 OF THE CLAREMONT MUNICIPAL CODE.
Body
ALTERNATIVES TO RECOMMENDATION
In addition to the recommendation, there are the following alternatives:
A. Request further information.
B. Take no action.
FINANCIAL REVIEW
The staff cost to prepare this report is estimated at $840 and is included in the operating budget of the Community Development Department.
ANALYSIS
The City’s current IHO requires housing development projects with five or more units to make fifteen percent of the units affordable to households that qualify as low-income and moderate-income households. The IHO requires developers of new “for sale” housing to either construct affordable units at affordable income levels at a ratio of 5-15 percent (“Claremont Low”) and the remainder at moderate-income levels for a total of 15 percent of the overall project units.
For housing development projects with seven or more units, Chapter 16.036 of the Claremont Municipal Code (CMC) requires City Council approval of a developer's request to pay an in-lieu fee instead of constructing the required affordable units. For the City Council to approve such a request, the City Council must make the following findings:
1. The housing development project complies with all requirements in the administrative manual;
2. Providing the inclusionary units on-site and/or through land dedication would result in an unreasonable economic hardship;
3. The developer has explored and exhausted all options to reduce the cost of development and sources of funding to subsidize on-site inclusionary units.
Even if the City Council can make these findings, it has discretion to deny a request for the in-lieu fee and, instead require the developer to construct the affordable units.
This request to “grandfather in” the prior in-lieu fee for development applications that were submitted prior to the change in fee structure would not automatically approve any in-lieu fee requests; it only reverts back to the prior fee structure for such applicants. Applicants would still be required to submit a request for City Council consideration of an in-lieu fee payment and the City Council would still have the discretion to approve or deny requests for in-lieu fees based on the required findings.
A similar precedent was set by the City in 2021 for applicants when the IHO was modified to require a minimum of five percent low-income units to be included in housing projects of seven units or greater. On September 14, 2021, the City Council modified the affordability level requirements of the inclusionary housing ordinance. The formula was modified to require 5-15 percent (“Claremont Low”), and the remaining 15 percent of units required to be restricted to moderate income.
Prior to the public hearing on this change, several potential future developers contacted the City expressing concerns regarding financial impacts to their projects that were currently under negotiations or in escrow. Developers with concerns requested that a phased-in approach be implemented. The City Council ultimately granted the request for a phased approach to implement since there was a concern regarding these financial impacts on “in process” or pipeline projects. The City Council approved a grace period to allow applications to be submitted for housing projects under the previous IHO.
The development community is now asking for a phased approach for pipeline projects that were assuming they could utilize the prior in-lieu fee formula. If granted, at least three residential projects in the pipeline could utilize this phased approach. These projects include the Clara Oaks, La Puerta School Site, and San Jose/Indian Hill Boulevard townhome developments.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City’s strategic and visioning documents and finds that it applies to the following City Planning Documents: Council Priorities and the General Plan.
CEQA REVIEW
This item is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact the City Clerk’s Office.
Submitted by:
Brad Johnson
Community Development Director
Attachment:
Draft Resolution Amending Resolution No. 2023-33