Chapter 18.38 — Affordable Housing Impact Fee – Residential Development

Sections:

18.38.010 – Purpose and Applicability 18.38.020 – Nexus Study 18.38.030 – Definitions 18.38.040 – Basic Requirement 18.38.050 – Density Bonus 18.38.060 – Affordable Housing Plan 18.38.070 – Administrative Guidelines 18.38.080 – Use and Expenditure of Fees 18.38.090 – Exemptions 18.38.100 – Enforcement 18.38.110 – Waiver 18.38.120 – Appeal

• A. Purpose . The housing impact fee authorized by this chapter serves the public necessity and general welfare and will promote the orderly development of the City. The fee will serve to implement California law by enabling the City to provide a share of the regional housing need, assist the City in meeting housing obligations and implement the Housing Element of the City's General Plan.

• B. Applicability . Each new market-rate unit in a residential project shall be subject to an Affordable Housing Impact Fee in compliance with the requirements of this chapter.

A Residential Nexus Study was prepared in 2013 and shall be periodically updated. The Nexus Study shall conform to the Mitigation Fee Act (Government Code Sections 66000-66025) by establishing an Affordable Housing Impact Fee Program that is roughly proportional to, and bears a reasonable relationship with the impact of new housing. Periodic updates to the Housing Impact Fee, and nexus study, will respond to market fluctuations, ensuring that the housing impact fee incorporates any changes in administration costs, rents, and sales prices.

In addition to the definitions in Article 1 of the Development Code, and the definitions in Chapter 18.35, the following definitions are applicable to this chapter.

Affordable Housing Impact Fee . A fee imposed upon certain dwelling units that reflects the reasonable costs to the City needed to mitigate the deleterious impacts of new development, which includes, but not limited to the costs the City has or will incur to fund the construction, acquisition, or financing of new or existing single- or multiple-family affordable housing projects.

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New Construction . In addition to newly built units, new construction includes the voluntary removal and replacement of existing units but does not include the enlargement of existing units.

Residential Project

• Any City land use approval, that authorizes two or more new dwelling units or live-work units or residential lots, or a combination of two or more residential lots, new dwelling units and live-work units; or

• Concurrent construction of two or more new dwelling units on a lot or adjacent lots not within the area of an approval, if, in the case of adjacent lots, there is evidence of overlapping ownership or control of the lot or lots in question. Construction shall be considered concurrent for all units for which, at any one time, a discretionary City land use approval, or building permit, or application for an approval or permit, is outstanding, and a certificate of occupancy has not yet been issued.

Residential Ownership Project . A residential project that includes the creation of one or more residential dwelling units that may be sold individually. A residential ownership project also includes condominium and stock cooperative conversions.

Residential Rental Project . Any residential project that creates residential dwelling units that cannot be sold individually.

• A. Affordable Housing Impact Fee . Except as otherwise noted, each new market-rate unit in a residential project shall be subject to an Affordable Housing Impact Fee upon adoption of the fee by resolution in compliance with the latest adopted nexus study. To account for market fluctuations and to ensure that the impact fee stays current with the reasonable costs of providing affordable housing, the Affordable Housing Impact Fee will be adjusted effective the first day of each new calendar year, as follows:

  1. Ownership projects . For ownership projects, the fee is to be adjusted annually based on the percentage change in the three-year trailing Freddie Mac San Francisco-OaklandFremont MSA House Price Index; and

  2. Rental projects . For rental projects, the fee shall be adjusted annually based on the annual percentage change in median rents by bedroom count in the City, averaged across unit sizes, as documented by the City's rent stabilization program.

• B. Inclusionary housing agreement . In the event a developer, subject to the provisions of this chapter, proposes to construct affordable dwelling units or to deed restrict the rents or sale prices of existing market-rate units, the City shall consider the request in the context of an inclusionary housing agreement, which is a regulatory agreement that outlines the obligations of the developer and the City. In that instance, at least 20 percent of all market-rate units in residential ownership projects constructed in the City shall be provided at an affordable ownership cost and shall be constructed not later than the related market rate units in the same residential project. The inclusionary housing agreement shall specify all of the following.

  1. Number of units . Number of units affordable to moderate-income, low-income, very low-income, and extremely low-income households;

  2. Income restrictions . The units shall be sold or rented to extremely low income, very low income, low-income or moderate income households at an affordable ownership cost or affordable rent, subject to the affordability restrictions;

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3. Agreement required . When a unit is sold or rented, the purchaser or lessee of each unit shall execute an instrument or agreement approved by the City restricting the sale and prohibiting the sublease of the units in accordance with this chapter. The instrument or agreement shall be recorded against the parcel containing the unit and shall contain provisions, as the City may require, to ensure continued compliance with this chapter;

4. Additional conditions . In the event of rental housing, an agreement shall additionally provide for the following conditions governing the use of the units during the restriction period, including:

   • a. The rules and procedures for qualifying households, establishing affordable rent, vacancies and maintaining units;

• b. Provisions requiring owners to verify household incomes and maintain books and records to demonstrate compliance with this chapter; and

  • c. Provisions requiring owners to submit an annual report to the City, which includes the name(s), address and income of each household occupying the units, and that identifies the bedroom size and monthly rent or cost of each unit.

5. Location . Location of the units, if not within the same site as the market-rate housing;

  - **Bedrooms** .  Number of bedrooms in each unit; and 

7. Marketing . Organization proposed to market the units, which shall be different than the developer, and shall have demonstrated experience in the sale or rental of the product type.

• C. Term of affordability for all units . The City requires a minimum 59 year renewable term for ownership units, and a 99 year renewable term for rental housing.

• D. City subsidized rental projects . Any residential rental project for which the applicant requests and receives direct City financial contribution, or any form of assistance specified in Government Code Chapter 4.3 (commencing with Section 65915) of Division 1 of Title 7, affordable housing may be required by the City in compliance with the terms of that assistance. If affordable housing is required, the City shall require, as a condition of City assistance, that the rental regulatory agreement include the applicant's agreement to any limitation on rents in consideration for the City's assistance, to ensure compliance with the Costa-Hawkins Act (Civil Code, Chapter 2.7 of Title 5 of Part 4 of Division 3).

• A. Applicability of fees . Any market-rate units contained in a residential project utilizing the City's density bonus provisions in compliance with Chapter 18.36 shall also be subject to the Affordable Housing Impact Fee in compliance with the provisions of this chapter. However, the Affordable Housing Impact Fee shall not be assessed on those units built and awarded under the City's density bonus provisions.

• B. Administration . Any affordable units constructed in compliance with Chapter 18.36 shall be jointly administered with the provisions of this chapter.

A. Affordable housing plan and conditions of approval .

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1. Application . An application for the initial approval of a residential project shall include an affordable housing plan describing how the residential project will comply with the provisions of this chapter, including the anticipated fee (based upon net square footage of each unit).

2. Conditions . Conditions shall be imposed upon the initial application to carry out the purposes of this chapter.

3. Additional conditions . Additional conditions may be imposed on later City approvals or actions, including without limitation planned unit developments, subdivision approvals, conditional use permits, and building permits, to implement the purposes of this chapter.

• B. Issuance of building permits . A building permit shall not be issued for any market-rate unit in a residential project until the developer has paid the applicable Affordable Housing Impact Fee in compliance with the requirements of this chapter.

• A. Maximum sales price . For a deed restricted ownership affordable unit the maximum sales price allowed on resale shall be the lowest of the following amounts:

  1. Purchase price plus allowed increase . The seller's lawful purchase price increased by the percentage of increase in the median income from the date of the original purchase of the home by the seller to the date the City is notified of the seller's intent to sell the home; or

  2. Fair market value . Fair market value; provided, however, that in no event shall this chapter require a sales price lower than the seller's lawful purchase price, plus the seller's reasonable cost of sales and the value of capital improvements, to the extent authorized by resale restrictions entered into by the City and the owner.

• B. Household eligibility . A household shall not be allowed to begin occupancy of a unit that is required to be affordable under this chapter unless the City or its designee has approved the household's eligibility. If the City maintains a list of eligible households, households newly occupying affordable units shall be selected first from that list to the extent provided in the regulatory agreement or resale restrictions. To the extent allowed by existing law, households in which at least one member has lived or worked in the City for at least one year shall have priority in receiving the opportunity to purchase or rent affordable units.

• C. Recorded restrictions . Regulatory agreements and, if the affordable units are owner-occupied units, resale restrictions, deeds of trust or other documents, all consistent with the requirements of this chapter, shall be recorded against affordable owner-occupied units and residential projects containing affordable rental units. The documents recorded under this Subsection shall require that the affordable units be maintained as the purchaser's primary place of residence.

  1. Owner occupied units . For owner occupied units, restrictions shall be effective for 59 years, and thereafter until payment of any funds due to the City under the applicable resale restrictions, and shall renew for a new term of 59 years upon any transfer during an existing fifty-nine-year term. The resale restrictions shall grant an option to the City or its designee to purchase any affordable owner-occupied unit at the maximum price that could be charged to a purchaser household, at any time the owner proposes sale.

  2. Rental units . For rental units, restrictions shall be effective for a term of 99 years and shall renew for a new term of 99 years upon any transfer during an existing ninety-nine-

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year term, or for so long as the structures that make up the residential rental project remain in existence, whichever period is shorter.

3. Approved forms . The City Attorney shall approve model forms of the documents required and all major variances from those forms for specific residential projects.

• D. Comparability of units . Affordable units shall be comparable to market-rate units in the same residential project in size, number of bedrooms, exterior appearance, interior features, overall quality of construction and all other respects, except for affordable multifamily units in a residential project in which all the market-rate units are detached housing, which need not be comparable in size or exterior appearance. Affordable units shall be dispersed throughout the residential project in a manner approved to the City.

• E. Guidelines/procedures . The City may choose to adopt guidelines or procedures for implementing this chapter.

• F. Minimum requirements . The requirements of this chapter are minimum requirements. The City may require additional affordable units or additional measures to further affordable housing goals to the extent it has authority to do so without respect to this chapter.

• A. Affordable housing fund . All fees collected under this chapter shall be deposited into a separate account designated as the Affordable Housing Fund.

B. Provision of affordable housing .

1. Use of fees . The fees collected under this chapter and all earnings from investment of the fees shall be expended exclusively for provision of affordable units in the City through acquisition, construction, development assistance, rehabilitation, financing, rent or other subsidies, provision of supportive services, or other methods and for the costs of administering this chapter. Eligible use shall include funding a revolving reserve fund to be used to purchase resale-restricted affordable units for resale to another qualified buyer to minimize the loss of affordability of these units.

2. Housing type and cost . The housing shall be of a type, or made affordable at a cost or rent, for which there is an unmet need in the City and that is not adequately supplied in the City by private housing development in the absence of public assistance by the City.

3. Administration . Administration includes reviewing the compliance and administration of resale restrictions on existing affordable units to ensure that adequate provisions are made to minimize the loss of affordability of these units.

The provisions of this chapter shall not apply to the following:

• A. Deed restricted units . Units contained within a 100 percent deed restricted affordable project provided that the affordability is consistent with covenants and terms approved by the City;

• B. Density bonus units . Affordable dwelling units built and awarded under Chapter 18.36; and

• C. Accessory dwelling units . Accessory dwelling units approved in compliance with Chapter 18.96.

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• A. Misdemeanor . It shall be a misdemeanor for any person to sell or rent an affordable unit under this chapter at a price or rent exceeding the maximum allowed or to a household not qualified under this chapter.

• B. Enforcement . The City Attorney shall be authorized to enforce the provisions of this chapter and all regulatory agreements and resale controls placed on affordable units by civil action and any other proceeding or method allowed by law.

• C. Revocation . The City may revoke, deny or suspend any permit or development approval for a residential project that has failed to comply with this chapter.

• D. Failure to fulfill requirements . Failure of any official or agency to fulfill the requirements of this chapter shall not excuse any applicant or owner from the requirements of this chapter.

• E. Cost recovery . The City shall be entitled to recover all costs, including reasonable attorneys' fees incurred in enforcing this chapter.

• A. Suspension of requirements . Notwithstanding any other provision of this chapter, the City Council may waive, limit or suspend the requirements of this chapter upon a finding and determination that doing so is in the best interests of the City, including without limitation the bases set forth below.

  1. No deleterious impact finding . Where the applicant establishes to the City's satisfaction that the proposed development project will not generate any additional need for affordable housing, the City Council may waive the requirements of this chapter.

  2. Deprivation of constitutional rights . The City shall not condition any permit in any manner that results in a deprivation of the applicant's constitutional rights.

  3. Hardship . The City may waive or limit the requirements of this Chapter if doing so would work an undue hardship on the applicant. It is entirely the burden of the applicant to show hardship and to produce evidence to support the following findings:

     • a. The imposition of the mitigation or fee otherwise required by this Chapter would make the development of the particular project infeasible; and

     • b. The benefits to the City from the particular development project outweigh its burdens in terms of increased demand for affordable housing and other deleterious impacts.

     • c. For purposes of this subsection, "infeasible" shall mean incapable of being accomplished in a successful manner within a reasonable period of time, taking into account economic, environmental, legal, social and technological factors.

• B. Burden of proof . The burden of establishing, by satisfactory factual proof, the applicability and elements of defenses shall be on the applicant.

• C. Finding . No waiver or limit shall be granted in compliance with this section unless a finding is made, based on satisfactory factual proof provided by the applicant, that at least one of the requirements set forth in this section have been satisfied.

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• A. Appeal to Commission . The applicant for a residential project subject to the provisions of this chapter and aggrieved by any administrative decision of the City relating to the imposition of requirements of this chapter may appeal the decision to the Commission.

• B. Appeal to City Council . The applicant for a residential project subject to the provisions of this chapter and aggrieved by any decision made by the Commission may appeal the decision to the Council.

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