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Meeting Date: 03/15/2021  
Submitted By: Chris Schaefer, Senior Planner


That the City Council:


The proposed amendments are exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) of the CEQA guidelines.

On January 21, 2014, the City Council certified Environmental Impact Report 13-01 associated with the La Habra General Plan 2035, the 2014-2021 Housing Element Update, and the La Habra Climate Action Plan (CAP).  The proposed action fulfills one of the stated goals of the La Habra General Plan 2035.  The goals and policies discussed within this report were analyzed as part of the approved EIR and therefore no additional CEQA review is required.  Any future improvement of potential development sites, subject to this proposal, will be required to be reviewed pursuant to the CEQA requirements at such time as development is considered.
On January 19, 2021, staff presented this proposed Zone Change to the City Council for consideration.  At the public hearing the Orange County Taxpayers Association expressed their opposition to the Inclusionary ordinance because they viewed the ordinance as a tax increase on businesses that would be passed onto future homeowners.  After the close of the public hearing the City Council voted to table th proposed Zone Change and directed staff to bring it back for further consideration at a future date.

During its meeting on February 4, 2021, the General Plan Advisory Committee (GPAC) discussed Inclusionary Housing policies as a planning tool that could help the City meet its Regional Housing Needs Assessment (RHNA) goals.  A number of individuals and interest groups participated in the meeting and advocated for the adoption of such Inclusionary Housing policies.  There was consensus among GPAC members that Inclusionary Housing represented good public policy for the City Council to consider adopting. 

At the City Council meeting held on February 16, 2021, Mayor Pro Tem Medrano and Mayor Espinoza directed staff to re-agendize the Inclusionary Housing ordinance for further City Council discussion and consideration. 

The Current General Plan contains goals and policies for the orderly growth and development of the City.  In many cases, the goals and policies are presented as items for potential future action by the City Council, subject to timing or funding considerations.  The General Plan's Housing Element contained a goal to consider the creation of an Inclusionary Housing ordinance within five years of adoption of the General Plan.

An Inclusionary Housing ordinance requires multi-family housing developers to make available a portion of their units to low-income buyers or renters.  Such a policy would utilize the economic gains from rising real estate values to construct affordable housing for lower income families.  Prior to the dissolution of redevelopment agencies in California, affordable housing was often funded through a set-aside portion of the tax increment that funded redevelopment agency operations.  Since the dissolution of redevelopment several years ago, most cities no longer have a dedicated source of funding that can be used for the provision of affordable housing.

The proposed Inclusionary Housing ordinance would be applicable to projects of 10 or more residential units, would require that 15 percent of the units of a proposed residential housing development be affordable, and would allow developers the option of paying an in-lieu fee to the City rather than providing affordable units as part of their project.  Elements of the proposed ordinance are more fully described later in this report.

While Inclusionary Housing ordinances are not mandatory under state law, they can provide cities with an effective tool to facilitate and encourage the construction of affordable housing units in the community and help satisfy state-mandated affordable unit production requirements under RHNA.  The City of La Habra's RHNA goal for the upcoming cycle (2021-2029) is 804 units of very low, low, moderate and above moderate income housing in the City.
Chapter 8 (Implementation Manual) of the La Habra General Plan contains a set of measures to achieve the various goals and policies. The Implementation Manual is arranged chronologically and discusses the time at which specific goals and policies are expected to be pursued and achieved.   Goals and policies are categorized as either “Near Term,” “Annual,” “Continuing,” “Periodic Updates,” and “Mid- to Long-Term.”  The following “Near Term" goal as it relates to Inclusionary Housing is included in the Implementation Manual: 
B11 Inclusionary Housing Ordinance
The City will consider adopting an Inclusionary Housing ordinance.  The City will collect information and conduct research through case study examples and other experiences from similar cities to develop baseline best practice provisions that would require new residential and/or mixed-use developments provide affordable housing units.  Analysis should include documentation of the intent and purpose, findings demonstrating the need, key terms and definitions, specific procedures and standards (e.g., percentage of units, affordability levels, duration of affordability requirements), eligibility for exceptions or alternative(s) to the production of the affordable units (e.g., payment of an in-lieu affordable unit fee), and a system for enforcing and monitoring compliance.  This information will be provided to City decision makers to determine the feasibility of developing an Inclusionary Housing ordinance.

The specific housing element policy and program are:
Policy A7  Inclusionary Housing
Explore the development of an Inclusionary Housing ordinance.
Program A5  Inclusionary Housing
Consider adopting an Inclusionary Housing ordinance that would require new residential and/or mixed-use developments provide affordable housing units. The City will collect information and conduct research through case study examples and other experiences from similar cities to develop baseline best practice provisions. Analysis should include documentation of the intent and purpose, findings demonstrating the need, key terms and definitions, specific procedures and standards (e.g., percentage of units, affordability levels, duration of affordability requirements), eligibility for exceptions or alternative(s) to the production of the affordable units (e.g., payment of an in-lieu affordable unit fee), and a system for enforcing and monitoring compliance. This information will be provided to City decision makers to determine the feasibility of developing an Inclusionary Housing ordinance.

Staff began preparation of the proposed Inclusionary Housing ordinance in November 2014; however, work ceased due to litigation surrounding these types of ordinances that were occurring in other California cities.  Litigation focused on the validity of Inclusionary Housing ordinances in California and targeted cities which had adopted Inclusionary Housing ordinances.  In the case of California Building Industry Association (CBIA) v. the City of San Jose, the California Supreme Court upheld the City of San Jose’s Inclusionary Housing Ordinance and determined that such ordinances are legally valid.

Current zoning practices, while not intentionally exclusionary, have impacted the production of affordable units. To help address this, many cities throughout the United States, including here in California, have implemented inclusionary zoning as a planning tool to encourage the development of affordable units. To facilitate the production of affordable housing, the State of California has, since 1980, enacted several laws that, in addition to authorizing cities to adopt Inclusionary Housing ordinances, have also mandated local jurisdictions to adequately plan and meet the housing needs of all income levels in their communities.  To that end, the State of California requires that the regional agencies, such as the Southern California Association of Governments (SCAG) in Southern California, forecast the housing needs of cities within specific geographic regions of California.  This forecast is the basis of RHNA.

RHNA occurs on an eight-year cycle and establishes the number of affordable units each municipality is required to plan for, as well as provide areas in respective jurisdictions where units can be constructed.  The most recent policy actions by the State has resulted in a goal that three million new housing units be built statewide during the current RHNA cycle, with approximately 1.3 million housing units allocated to SCAG cities.  Of that number, La Habra has been allocated 804 new units.

The break down by affordability range for La Habra is shown below:
Affordability Range Number of units
Above Moderate 365
Moderate 131
Low 116
Very Low 192

In the past there have been no penalties assessed by the State against cities who did not meet their allocated RHNA requirements; however going forward, jurisdictions that fail to "make adequate steps" toward meeting their RHNA numbers may face penalties by the State, which could include:
  • Refusal by the State to certify a city's General Plan or Housing Element, which may result in fines pursuant to California Government Code 65584.08 and/or the loss of local control over certain land use decisions;
  • Legal action initiated by the State of California; and
  • The potential withholding of Federal and State grant money, such as Cal Home Program funds; streets, infrastructure and transportation grants; homelessness assistance grants; affordable housing grants (SB-2, LEAP, etc.); Jobs/Housing Balance Improvement Incentive Grant funds; and Community Development Block Grant Program funds.
Current City Practices
The City of La Habra has utilized a variety of tools to help satisfy affordable housing requirements (see Past City Actions, Attachment 3).  Generally, this effort has been accomplished through the use of discretionary permits, such as Specific Plans, Planned Unit Developments (PUDs), and Development Agreements, wherein conditions of approval included the provision of affordable housing units.  Examples of providing affordable housing units have included the conversion of existing market rate units to affordable units, setting aside land for affordable units, or paying an “in-lieu-of” fee by the developer to the City's Housing Authority. 

Most recently, the City adopted Chapter 18.80 “Affordable Housing Incentives” of the La Habra Municipal Code (LHMC), which was required for the City to comply with State mandates.  LHMC Chapter 18.80 adheres to State law and provides concessions to housing developers on zoning development standards.  Concessions may include:  reduced parking requirements, approval for the construction of additional units, and/or deviations on development standards, such as building setbacks or height requirements. To date, two residential projects totaling eighty units of new housing have taken advantage of the incentives described in LHMC Chapter 18.80.  The result has been the production of five affordable units within one project and three affordable units pending the actual construction of the second project.

In most cases, developers have contributed funding to the City for affordable housing, but not in amounts that have allowed the Housing Authority to accumulate sufficient funds towards the production of a significant number of affordable units.  The current method to encourage the construction of affordable housing is either ineffective or insufficient and, subject to Council consideration, should be replaced with a process that results in the successful development of affordable housing units. 

Inclusionary Housing Ordinance Survey
As part of its study into this issue, staff conducted a survey to examine the Inclusionary Housing ordinances of other local Orange County cities (see Inclusionary Housing Survey, Attachment 4).  Currently, eight of 34 cities in Orange County have an Inclusionary Housing ordinance.  For Orange County cities that have an Inclusionary Housing ordinance, the majority require that a minimum of 15% of new units constructed as part of a new residential development be affordable; however, other aspects of these ordinances vary from city to city.

Proposed Ordinance
Based on the review of other cities' requirements, staff prepared a draft ordinance that incorporate aspects of other similar ordinances that staff believes to be the most effective in achieving the goal of constructing affordable units (see Resolution, Attachment 1).  The draft ordinance is intended to be as simple as possible, yet still provide the City with the ability to receive fair-market in-lieu payments, should a developer choose to not construct affordable housing units as part of a proposed project.

The proposed Inclusionary Housing ordinance includes the following features: 
  • Applies to projects of 10 or more residential units (for-sale or rental).
  • Requires that 15% of units within a residential project be affordable.
    • If units are for sale, affordable units must be available to families earning no more than 110% of area annual median income (in La Habra, this currently equates to $98,374 per year for a family of four).
    • If units are rental, 9% of units must be available to moderate income families and 6% of units must be available for low and very-low income families.
  • Units can be provided "on site" as part of the proposed development, or at another location within the City.
  • Units must maintain affordability for a period of time consistent with State law (currently 55 years for rental units and 45 years for owner-occupied units).
  • Developers can choose to pay an in-lieu fee to the City's Housing Authority instead of providing affordable units.
  • An In-lieu fee provided by a developer will be retained by the City to be used toward the production of future affordable housing units.
The adoption of an Inclusionary Housing ordinance has certain advantages, which include the following:
  • Codifies the Inclusionary Housing requirement within the LHMC;I
  • Removes the step of having staff attempt to negotiate affordability considerations with developers;
  • Establishes a standard in-lieu fee calculation;
  • Sets consistency for multi-family projects during discretionary permit process;
  • Provides the City an additional tool in meeting RHNA numbers;
  • Provides residential developers greater up-front certainty regarding the city's requirements; and,
  • Ensures the development of affordable housing units in order to comply with State law and RHNA allocations.
The draft ordinance, if adopted, provides a stronger method of enforcement, is generally consistent with Inclusionary Housing ordinances of other Orange County cities, and does not discourage developers from proposing new residential development in the community. It should be noted that a representative from the BIA (Building Industry Association) has contacted staff several times regarding this matter and expressed opposition to the proposed ordinance as the BIA believe the ordinance represents an unfair burden on housing developers and is a deterrent to building homes within jurisdictions that adopt such ordinances.  

The adoption of an Inclusionary Housing ordinance provides the City with a tool to facilitate the construction of affordable units.   To date, the incentives currently contained within the LHMC have not resulted in the meaningful construction of new affordable housing units; therefore, staff recommends that the City Council approve Zone Change 20-03 adopting an ordinance adding Chapter 18.82 "Inclusionary Housing Units" to the LHMC.

Required Findings and Conditions
No specific findings are required as part of a zone change; however, the purpose of this action is to fulfill a goal of the La Habra General Plan 2035.
The Planning Commission considered the item during its meeting on November 9, 2020.  During deliberation, Commissioner Munoz stated his concern about the placement of affordable units in back areas or other out-of-the-way locations and asked the Planning Commission to consider adding language that prevented this occurrence.  Chair Nigsarian and Commissioner Powell stated that these types of projects were required to come before them as discretionary permits, and that (the Planning Commission) would have the ability to review the locations of affordable units; therefore, no additional language was necessary in the ordinance.

Commissioner Bernier expressed her concern that affordable units would be smaller or not comparable to market-rate units in the project.  Staff explained that the ordinance requires that affordable units be of comparable design, quality, and amenities as the market-rate units.  Commissioner Manley added that there was a multi-family residential project in Whittier along Whittier Boulevard that had a large amount of affordable units which were of comparable design to the market-rate units and that the project was very nice overall.
There were no persons who spoke in favor or against the project during the public comments portion.  The item was unanimously approved.
There are no anticipated fiscal impacts to the City's General Fund as expenses would be borne by the applicants should an Inclusionary Housing Ordinance be adopted.  In the event a developer chooses to pay the in-lieu fee rather than constructing affordable units in their project, a fee would be determined based on the cost of actually constructing units for that project.

For example, if a developer proposed to build a residential development consisting of 40 market rate units, each costing approximately $200,000 to construct, per the building valuation chart at that time, the developer would be required to set aside 6 of those 40 units (15% of the project) as affordable. If the developer opted to pay an Inclusionary Housing fee rather than set aside units within their proposed development, then the fee would be calculated by multiplying $200,000 per unit by the number of required affordable units, six in this example, for a total fee of $1,200,000. The fee would be paid to the La Habra Housing Authority and combined with other paid fees to be used by the City for future affordable housing construction.
H 1.1 Support State Housing Policy
H 1.2 Integrated Strategy for Development
H 1.3 Support Private Sector Housing Production
H 1.4 Variety of Housing
H 1.5 Market and Non-Market Housing Production Needs
H 1.7 Inclusionary Housing
H 1.8 Mixed Use Development
H 2.10 Preservation of Affordable Housing
H 3.1 Equal Opportunity Housing
H 3.7 Additional Housing Assistance Resources of the La Habra General Plan 2035
1. Inclusionary Housing Ordinance
2. Exhibit A to Ordinance
3. Past City Actions
4. Inclusionary Housing Ordinance Survey
5. Planning Commission Minutes 11-9-20 DRAFT
6. Legal Notice
7. Inclusionary Housing Presentation
8. Submitted at the dais
Inclusionary Housing Submitted at dais


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