18.40 010 – Authority and Applicability

• A. Authority. The fees established by this chapter are adopted under the authority of California Constitution Article XI, Section 7, which provides: “A county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws,” and in accordance with the findings specified in Ordinance 397, adopted July 19, 2016.

• B. Applicability. This chapter shall apply to all nonresidential development projects the extent permitted by the statutes and laws of the state.

The purpose of this chapter is to:

• A. Enhance the public welfare by imposing a nonresidential development project Housing Impact Fee whereby developers of nonresidential development projects will mitigate the impacts of their projects on the need for affordable housing by contributing to the supply of housing for households with very low, low, and moderate incomes; and

• B. Implement the Housing Element by creating a mechanism to provide benefits to the community from new development in the form of affordable housing, thereby helping to meet the needs of all socioeconomic elements of the community as provided in the Housing Element.

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 Impact Fee-Nonresidential Development and Housing FeesNonresidential Development . The fee paid by developers of nonresidential development projects to mitigate the impacts that such developments have on the demand for affordable housing in the City.

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Housing Impact Fee-Nonresidential Development. A fee paid by developers of nonresidential development projects to mitigate the impacts that the developments have on the demand for affordable housing in the City.

Nonresidential Development Project. An application for a planning permit or Building Permit that includes the new construction of gross square feet of nonresidential space or the conversion of a residential use to a nonresidential use.

• A. Imposition of Fee. A Housing Impact Fee is imposed on all developers of nonresidential development projects. The amount of the Housing Impact Fee shall be established from time to time by resolution of the City Council. Housing impact fees shall not exceed the cost of mitigating the impact of nonresidential development projects on the need for affordable housing in the City.

• B. Payment of Fee. Payment of the nonresidential development project Housing Impact Fee shall be due at the issuance of the first permit entitling the developer to complete the nonresidential development project. The fees shall be calculated based on the Master Fee Schedule in effect at the time the first permit is issued.

• A. Additions Less Than 10,000 Square Feet. The Housing Impact Fee shall not apply to developers of nonresidential development projects adding 10,000 square feet or less of new square footage. The Housing Impact Fee shall apply, however, to developers of more than one project when each project adds 10,000 or less net new square footage.

• B. Other Exemptions. The Housing Impact Fee shall not apply to developers of nonresidential development projects in one or more of the following categories:

  1. Nonresidential development projects located on property owned by the state, the United States of America, or any of its agencies and used exclusively for governmental or educational purposes.

  2. Any structure proposed to repair or replace a building that was damaged or destroyed by fire or other calamity, so long as the square footage and use of the building remains the same, and construction of the replacement building begins within one year of the damage's occurrence.

  3. Nonresidential development projects that have received a vested right to proceed without payment of Housing Impact Fees in compliance with state law, including those that are the subject of development agreements currently in effect with the City, if the development agreements were approved prior to the effective date of Ordinance 397 (adopted July 19, 2016) and where the agreements expressly preclude the City from requiring payment of the Housing Impact Fee.

  4. Nonresidential development projects that have received all required building and planning permits prior to the effective date of Ordinance 397 (adopted July 19, 2016).

  5. Other uses that may be specified by resolution of the Council.

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• A. Alternatives. As an alternative to compliance with the basic provisions of this chapter, developers of nonresidential development projects may propose to mitigate the affordable housing impacts of nonresidential development through the construction of affordable units on site or through an alternative mitigation program proposed by the developer and the Review Authority, including the provision of off-site affordable units, donation of land for the construction of affordable units, or purchase of existing units for conversion to affordable units.

  1. The City Council may adopt by resolution the percentage of affordable units needed to mitigate the impact of nonresidential development projects on the need for affordable housing.

  2. Any affordable rental or for-sale units proposed as an alternative to the payment of the Housing Impact Fee shall be subject to the basic requirements and administrative guidelines specified in with regard to the housing impact fee for residential development in Chapter 18.38.

  3. If a developer proposes to provide affordable rental units, then, to ensure compliance with the Costa-Hawkins Rental Housing Act (Chapter 2.7 of Title 5 of Part 4 of Division 3 of the Civil Code), the City may only approve a proposal if, as required by Civil Code Sections 1954.52(b) and 1954.53(a)(2), the developer agrees in a contract with the City to limit rents in compliance with the provisions related to the housing impact fee for residential development in Chapter 18.38 in consideration for a direct financial contribution from the City or a form of assistance specified in the Density Bonus Law (Chapter 4.3, commencing with Section 65915, of Division 1 of Title 7 of the Government Code). The developer may request that the City waive the Housing Impact Fee as a direct financial contribution to the rental residential development project.

• B. Affordable Housing Plan. If the developer seeks an alternative to the payment of the Housing Impact Fee, then the application for the first approval of a nonresidential development project for which the alternative is sought shall include an affordable housing plan that describes how the alternative will comply with the provisions of this chapter and Chapter 18.38. No affordable housing plan is required if the developer proposes only to pay the Housing Impact Fee.

  1. Nonresidential development projects requesting an alternative to payment of the Housing Impact Fee require that an affordable housing plan be submitted in compliance with this chapter prior to the application being deemed complete.

2. The affordable housing plan shall be processed concurrently with all other permits required for the nonresidential development project. Before approving the Affordable housing plan, the Review Authority shall find that the affordable housing plan conforms to the requirements of this chapter. A condition shall be attached to the first approval of any nonresidential development project to require recordation of an affordable housing agreement, as described in this section, prior to the approval of any final or parcel map or building permit for the nonresidential development project.

   3. The approved affordable housing plan may be amended prior to issuance of any building permit for the nonresidential development project. A request for a minor modification of an approved affordable housing plan may be granted by the Review Authority if the modification is substantially in compliance with the original affordable housing plan and conditions of approval. Other modifications to the affordable housing plan shall be processed in the same manner as the original plan.

   4. If required to ensure compliance with the approved affordable housing plan, affordable housing agreements acceptable to the Review Authority shall be recorded against the nonresidential development project prior to approval of any final or parcel map, or

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  - issuance of any building permit, whichever occurs first.  The affordable housing agreement shall specify the number, type, location, size, and phasing of all affordable units, provisions for income certification and screening of potential purchasers or renters of units, and resale control mechanisms, including the financing of ongoing administrative and monitoring costs, consistent with the approved affordable housing plan, as determined by the Review Authority. 

• C. Findings. The Review Authority may approve or conditionally approve an affordable housing plan that proposes on-site construction of affordable units if the Review Authority first determines, based on substantial evidence, that:

  1. The proposed affordable units comply with the standards in Chapter 18.38, including the requirement that the affordable units be made available for occupancy concurrently with the market-rate units; and

  2. The affordable units will mitigate the impact of the project on the need for affordable housing.

• D. Off-Site Affordable Units. If a developer proposes off-site affordable housing units or any other alternative in the affordable housing plan, the Review Authority may approve the proposal if it is able to make the findings and the proposal meets all of the following conditions:

  1. Financing or a viable financing plan, which may include public funding sources, is in place for the proposed affordable housing units; and

  2. The proposed location is suitable for the proposed affordable housing unit, is consistent with the Housing Element, General Plan, and applicable zoning, and will not tend to cause residential segregation.

• A. Standards. All affordable units provided shall meet the standards set forth in Chapter 18.35 and Chapter 18.36.

• B. Timing. All affordable units provided shall be made available for occupancy concurrently with the market-rate units. For the purposes of this section, "concurrently" means that the City shall not issue building permits for more than 50 percent of the market-rate units until it has issued building permits for all of the affordable units, and the City may not approve any final inspections or certificates of occupancy for more than 50 percent of the market-rate units until it has issued final inspections or certificates of occupancy for all of the affordable units.

• C. Resale Restriction. All affordable units provided shall be subject to a resale restriction, deed of trust, and/or regulatory agreement recorded against the property.

• A. Affordable Housing Fund. All Housing Impact Fees or other funds collected under this chapter shall be deposited into the Affordable Housing Fund.

• B. Expenditure of Funds. The monies in the Affordable Housing Fund and all earnings from investment of the moneys in the Fund shall be expended exclusively to provide housing affordable to extremely low income, very low income, lower income, and moderate income households in the City, consistent with the goals and policies contained in the Housing Element and the purposes for which the fees were collected, and for administration and compliance

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monitoring of the affordable housing program. The Council may, from time to time, adopt guidelines for expenditure of monies in the Affordable Housing Fund.

• A. Waiver or Modification of Fees. As part of an application for the first approval of a nonresidential development project, a developer may request that the requirements of this chapter be waived or modified by the Review Authority, based upon a showing that applying the requirements of this chapter would result in an unconstitutional taking of property or would result in any other unconstitutional result, or because there is no reasonable relationship between the impact of the development and the need for affordable housing.

  1. A request for a waiver or modification shall be submitted concurrently with the project application. The developer shall specify in detail the factual and legal basis for the claim, including all supporting technical documentation.

  2. A request for a waiver or modification shall be reviewed and considered at the same time as the project application. The Council may from time to time establish by resolution a processing fee for review of any request for a waiver or modification.

• B. Analysis. The waiver or modification may be approved only to the extent necessary to avoid an unconstitutional result, based upon legal advice provided by or at the recommendation of the City Attorney, after adoption of written findings, based on legal analysis and the evidence. If a waiver or modification is granted, any change in the project shall invalidate the waiver or modification, and a new application shall be required for a waiver or modification in compliance with this section.