Morro Bay Municipal Code Ch. 17.24 Affordable Housing, Density Bonuses, and Other Incentives

The purpose of this chapter is to:

A. Meet the requirements to provide affordable housing contained in Government Code Sections 65580—65589.11 through inclusionary housing; and

B. Promote and facilitate the provision of very-low, low, and moderate-income housing and housing for seniors, foster youth, veterans, and homeless persons consistent with the provisions of Government Code Sections 65915—65918 and the housing element of the general plan.

(Ord. No. 662, § 2, 12-13-23)

A. Pursuant to the requirements of Government Code Sections 65580—65589.11, the following types of projects shall be required to provide inclusionary housing:

1. Single-family homes of two thousand five hundred square feet or more of habitable floor area (excluding the floor area of any JADU or ADU units);

2. Residential developments of five or more units;

3. Residential development of two, three or four units with individual habitable floor areas of one thousand five hundred square feet or more (excluding the floor area of any JADU or ADU units);

4. Condominium conversion projects;

5. All new commercial projects of two thousand five hundred square feet or more of commercial floor area; and

6. Mixed-use projects of two thousand five hundred square feet or more of commercial floor area that also include either: one, two, three or four residential units with individual habitable floor areas of one thousand five hundred square feet or more, or with five or more residential units (of any size).

B. Single-family homes with two thousand square feet (habitable floor space for primary dwelling) or more shall either pay an in-lieu fee or build (or include) an on-site accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU).

C. Residential projects of five or more units, residential projects with two, three or four units with individual habitable floor areas of one thousand five hundred square feet or more, and condominium conversion projects, shall provide a minimum of one inclusionary unit or ten percent of the total number of units, whichever is greater, to be affordable to families with incomes in the very low-, low-, or moderate-income ranges, based on an affordable housing proposal which details unit types to the approval of the community development director with consideration for the needs of the city at the time of approval. The lower-income units may be either for rent or for sale. As noted in Section 17.24.050 affordable rental units shall be deed restricted to maintain affordability criteria for a minimum of fifty-five years, and for-sale and owner-occupied units for a minimum of forty-five years.

D. Commercial projects shall be required to provide at least one affordable dwelling unit within the project, or pay an in-lieu fee.

E. Mixed-use projects shall meet the requirements of Section 17.24.020 C for the residential component of the project, as well as pay applicable commercial fees per Section 17.24.030.

F. In accordance with Government Code Section 65590, the city shall require the developer to provide affordable housing on-site where feasible. If the city determines that this is not feasible based on a detailed economic analysis prepared by a city-contracted consultant at the cost of the applicant, the city shall require the developer to provide such housing at another location in Morro Bay. If the city determines that it is not feasible for the developer to provide such affordable housing off-site, the developer shall pay a fee in lieu of providing such housing. Said fee shall be as prescribed in Section 17.24.030.

G. In lieu of providing on-site affordable housing or paying an in-lieu housing fee to meet inclusionary requirements, an applicant may meet the requirements of this chapter by dedicating land to the city to another public agency or non-profit housing agency for providing affordable housing units, subject to the approval of the community development director.

H. The number of affordable inclusionary units shall be provided as required by this section. Affordable units required by the inclusionary ordinance count as affordable units toward meeting requirements for the density bonus.

I. The following types of projects are not required to provide inclusionary units:

1. Residential developments of two, three or four units with individual habitable floor areas of less than one thousand five hundred square feet;

2. New commercial developments of less than two thousand five hundred square feet of floor area;

3. Residential and commercial building additions, repairs, or remodels, provided that such work does not increase the number of existing dwellings by four or more units or result in an increase in floor area of two thousand five hundred square feet;

4. Commercial condominium conversions which do not result in the creation of new dwellings;

5. Emergency projects or projects which the council determines are necessary to protect public health and safety;

6. Development projects which the director determines are essentially noncommercial or nonresidential in nature, which provide educational, social, or related services to the community and which are proposed by public agencies, nonprofit agencies, foundations, and other similar organizations;

7. Projects which replace or restore a structure damaged or destroyed by fire, flood, earthquake, or other disaster within three years prior to the application for the new structure(s) consistent with the size and scale of the pre-existing structure(s). If the project prior to destruction was affordable by design or condition, then affordability requirements may apply; and

8. Projects for which an approved tentative map or vesting tentative map exists, or for which a construction permit was issued prior to the effective date of the ordinance codified in this chapter and the permittee has unexpired permits.

(Ord. No. 662, § 2, 12-13-23)

In cases where the provisions for the required affordable housing are not being met on-site or off-site, the applicant may contribute in-lieu fees. Said fees shall be paid prior to issuance of a building permit or final tract map. Fees shall be established on a project basis using the following method:

A. Fees accepted for affordable housing shall be used by the city to construct or assist in the construction of housing for rent or sale to very low-, low- and moderate-income families or to purchase land for the purpose of affordable housing or to assist very low-, low- and moderate-income families to afford adequate housing or for other measures to provide housing for low- and moderate-income families. The city may, at its option, transfer in-lieu fees to another public agency, such as a nonprofit housing provider, for the purpose of providing affordable housing in the city of Morro Bay or may allow fees to be used for projects located outside city limits with the goal of providing flexibility for the benefit of residents. However, projects within city limits should be prioritized.

(Ord. No. 662, § 2, 12-13-23)

A. Applicability. Pursuant to the requirements of Government Code Sections 65915—65918, the provisions of this section apply to the construction of five or more housing units that satisfy one or more of the following criteria:

1. At least ten percent of the units are designated for low-income households;

2. At least five percent of the units are designated for very low-income households;

3. At least ten percent of the units are designated for moderate-income households, provided that all units in the development are offered to the public for purchase;

4. One hundred percent of the units in a senior housing development of at least thirty-five units as defined in Sections 51.3 and 51.12 of the Civil Code or a mobile home park that limits residency based on age requirements for housing for older persons pursuant to Government Code Section 798.76 or 799.5;

5. Donation of land to the city consisting of at least one acre, or of sufficient developable acreage and zoning classification to permit construction of at least forty units, and not less than ten percent of the residential units in the proposed development, that are affordable to very-low income households.

6. One hundred percent of the housing units (other than manager's units) are restricted to very low, lower and moderate-income residents (with a maximum of twenty percent available to residents with moderate income level).

7. At least ten percent of the housing units are for transitional foster youth, disabled veterans or homeless persons, with rents restricted at the very low-income level.

8. At least twenty percent of the housing units are for low-income college students in housing dedicated for full-time students at accredited colleges.

9. At least thirty-three percent of the total units in a condominium conversion projects are available to lower or moderate-income households, or fifteen percent of the total units of the proposed condominium project to lower income households.

B. Affordability Criteria. The various income thresholds for affordable housing rents are calculated in accordance with Health and Safety Code Section 500523 and 25 CCR Section 6918. The various income thresholds for affordable housing purchase costs for for-sale units are subject to Health and Safety Code Section 50052.5 and 25 CCR Section 6920. These income thresholds for different affordability categories are published annually by the County of San Luis Obispo.

C. Calculating the Density Bonus. A density bonus shall be calculated on a sliding scale based upon the amount by which the percentage of affordable housing units exceeds the minimum number of affordable units required to qualify for a density bonus established in Section 17.24.040(A). The density bonus shall be calculated as follows:

1. A twenty percent density bonus, increasing by an additional one and one-half for each additional one percent increase in low-income units above the initial ten percent threshold, per Section 17.24.040 A1, above.

2. A twenty percent density bonus, increasing by an additional two and one-half percent for each additional one percent increase in very low-income units above the initial five percent threshold, per Section 17.24.040 A2, above.

3. A twenty percent density bonus for senior citizen housing developments pursuant Government Code Section 65915(g)(3).

4. A five percent density bonus, increasing by an additional one percent for each additional one percent increase in moderate-income units above the initial ten percent threshold, per Section 17.24.040 A3, above.

5. A twenty percent density bonus for foster youth, disabled veterans or homeless persons, above the initial ten percent threshold, per Section 17.24.040 A7, above.

6. A thirty-five percent density bonus for college students above the initial twenty percent threshold, per Section 17.24.040 A8 above.

7. A maximum of a twenty-five percent density bonus for a condominium conversion project meeting the affordability levels noted in Section 17.24.040 A9 above.

8. When an applicant proposes to construct a housing development that is eligible for a density bonus under Section 17.24.040 A, and includes a childcare facility that will be located on the premises of, or adjacent to, the housing development, the city shall grant either:

a. An additional density bonus that is an amount of square feet of residential space that is equal to or greater than the square footage of the childcare facility; or

b. An additional concession or incentive that contributes significantly to the economic feasibility of the construction of the childcare facility.

9. Maximum density bonus. The maximum density bonus authorized by this section, Section 17.24.040 A, and Section 17.24.040 B, collectively, is fifty percent when a project provides either fifteen percent very low-income units, twenty-four percent low-income units, or forty-four percent moderate-income units. The maximum density bonus for a project that is one hundred percent affordable (exclusive of a manager's unit or units) is eighty percent where the units are restricted to very low-, low-, and moderate-income units (with a maximum of twenty percent moderate units). All density bonus calculations resulting in fractional units shall be rounded up to the next whole number of housing units.

D. Developer Incentives.

1. Restrictions. When an applicant seeks a density bonus as prescribed by Government Code Section 65915, the city will grant the number of developer incentives as required by Section 17.24.040 D2, below, unless it makes any of the following findings:

a. The developer incentives are not required in order to provide affordable housing, as defined in Section 50052.3 of the Health and Safety Code, or for rents for the targeted units to be set as specified in Government Code Section 65915(c).

b. The developer incentives would have a specific adverse impact, as defined in paragraph (2) of Subdivision (d) of Section 65589.5, upon public health and safety or the physical environment or on any real property that is listed in the California Register of Historical Resources and for which there is no feasible method to satisfactorily mitigate or avoid the specific adverse impact without rendering the development unaffordable to low- and moderate-income households.

c. The developer incentives would be contrary to state or federal law.

2. Number of Developer Incentives. A developer eligible to receive a density bonus shall receive the following number of concessions or incentives, in addition to a density bonus:

a. One concession or incentive for projects that provide either ten percent of the units affordable to low-income households, five percent of the units affordable to very low-income households, ten percent of the units affordable to moderate-income households, or childcare facilities.

b. Two concessions or incentives for projects that provide either seventeen percent of the units affordable to low-income households, at least ten percent of the units affordable to very low-income households, or twenty percent of the units affordable to moderate-income households.

c. Three concessions or incentives for projects that provide either twenty-four percent of the units affordable to low-income households, at least fifteen percent of the units affordable to very low-income households, or thirty percent of the units affordable to moderate-income households.

d. Four incentives—Projects with one hundred percent very-low, low-, and moderate-income households, exclusive of a manager's unit or units. Up to a twenty percent maximum of the total units in the development, including total units and density bonus units, may be for moderate income households.

3. Parking. Upon request of a developer eligible to receive a density bonus, the city shall grant the following parking standards, inclusive of handicapped and guest parking, for the entire project as required by Government Code Section 65915(p)(1):

a. Zero to one-bedroom units—One on-site parking space per unit;

b. Two or three-bedroom units—One and one-half on-site parking spaces per unit; and

c. Four-bedroom units—Two and one-half parking spaces per unit

4. Developer Incentives Defined. For the purposes of this section, concession or incentive means any of the following:

a. Reduced site development standards or modified zoning code or architectural design requirements that exceed the minimum building standards approved by the California Building Standards Commission as provided in Part 2.5 (commencing with Section 18901) of Division 13 of the Health and Safety Code, including, but not limited to, a reduction in setback and square footage requirements and the ratio of vehicular parking spaces that would otherwise be required that results in identifiable, financially sufficient, and actual cost reductions.

b. Approval of mixed-use zoning if commercial, office, industrial, or other land uses will reduce the cost of the housing development and if the commercial, office, industrial, or other land uses are compatible with the housing project.

c. A density bonus greater than the amount required by this section.

d. Deferred or waived planning, plan check, construction permit, and/or development impact fees, in accordance with any fee deferral and waiver process and policies adopted by the city.

e. Direct financial aid in the form of a loan or grant to subsidize off-site improvements, land or construction costs.

f. Other regulatory developer incentives proposed by the developer or the city that result in identifiable, financially sufficient, and actual cost reductions.

5. Waivers and Modifications of Development Standards.

a. Proposal. In accordance with Government Code Section 65915(e), an applicant may propose a waiver or modification of development standards if they would physically preclude the construction of a development meeting the criteria for applicability, at the densities or with the developer incentives permitted by this section. A proposal for the waiver or reduction of development standards pursuant to this subdivision shall neither reduce nor increase the number of developer incentives to which the applicant is entitled pursuant to Section 17.24.040 D, above.

b. Grounds for Denial. In accordance with Government Code Section 65915(e), the city council, or the coastal commission on appeal, may deny an applicant's request to waive or modify the city's development standards in any of the following circumstances:

i. The application does not conform with the requirements of this section, Government Code Sections 65915—65918, or Coastal Act Section 30604(f).

ii. The applicant fails to demonstrate that the city's development standards physically preclude the utilization of a density bonus on a specific site.

iii. The waiver or reduction would have a specific, adverse impact, as defined in Government Code Section 65589.5(d)(2), upon health, safety, or the physical environment, and there is no feasible method to satisfactorily mitigate or avoid the specific adverse impact.

iv. The waiver or reduction would have an adverse impact on any real property that is listed in the California Register of Historical Resources.

v. The waiver or reduction would be contrary to state or federal law.

vi. If in the coastal zone, the project is found to be inconsistent with the local coastal program (including but not limited to sensitive habitat, agriculture, public view shed, public services, public recreational access and open space protections), with the exception of the density bonus.

E. Application Requirements and Evaluation.

1. All Applications. All applications for a density bonus, developer incentive, or waiver or modification of development standards must include the following information:

a. The total number of base units and affordable housing units;

b. The specific developer incentive(s) sought, if any, and documentation regarding the necessity of the incentive in order to provide affordable housing costs or rents; and

c. The specific waiver or modification to development standard(s), if any, and documentation regarding the necessity of the waver or modification, including documentation demonstrating that the city's development standards physically preclude the utilization of a density bonus.

2. Land Donations. If requesting a density bonus based on land donation in accordance with Government Code Section 65915(g), in addition to the above listed information, the application must:

a. Demonstrate the developable acreage and zoning classification is compliant with eligibility criteria of Section 17.24.030 A, and that the site is, or will be served by adequate public facilities and infrastructure;

b. Verify that all permits and approvals, other than building permits, necessary for the development of the very low-income housing units have been secured prior to the date of approval of the final subdivision map, parcel map, or other development permits;

c. Verify that the developer can donate and transfer land no later than the date of approval of the final subdivision map, parcel map, or residential development application; and

d. The land will be transferred to the city or to a housing developer approved by the city. The city may require the developer to identify and transfer the land to the affordable housing developer.

3. Childcare Facilities. If requesting a density bonus based on the provision of a child day care facility in accordance with Government Code Section 65915(h), in addition to the above listed information, the application must:

a. Provide the location of the proposed child day care facility and the proposed operator;

b. Agree to operate the child day care facility for a period of time that is as long as or longer than the period of time during which the density bonus units are required to remain affordable;

c. Agree to have contracted with a child day care facility operator for operation of the child day care facility before the first building permit is issued;

d. Agree that the child day care facility will be in operation when the first certificate of occupancy is issued; and

e. Of the children who attend the childcare facility, the children of very low-income households, low-income households and moderate-income households shall equal a percentage that is equal to or greater than the percentage of affordable units in the housing development that are required for very low-, low- or moderate-income households.

The city shall not be required to provide a density bonus or concession or incentive for a childcare facility if it finds, based upon substantial evidence, that the community has adequate childcare facilities.

(Ord. No. 662, § 2, 12-13-23)

A. Term of Availability. Where affordable housing units have been provided per the requirements of Section 17.24.020, Inclusionary Housing Requirements, or where a density bonus, incentives, or waivers of development standards has been made pursuant to this chapter, the developer shall assure both of the following:

1. Continued availability of affordable rental units for a minimum of fifty-five years and for-sale, owner-occupied units for a minimum of forty-five years.

2. Project phasing, including timing of completion, and rental or sale of affordable housing units shall occur concurrently with non-restricted units.

B. Long Term Affordability. A developer of affordable units shall enter into an affordable housing agreement with the city prior to the recordation of the final map, or the issuance of a grading permit or a building permit where approval of a map is not requested. The agreement shall be recorded against the parcel(s) designated for construction of the affordable units. The agreement shall run with the land and shall be binding upon the successor(s) in interest. At a minimum, the agreement shall include:

1. Total number and size of affordable units.

2. Maximum qualifying household incomes for the affordable units.

3. Standards for calculating affordable rents or affordable sales prices.

4. Enforcement mechanisms, including annual reporting and monitoring to ensure affordable units are continuously occupied by eligible households and remedies for breach of the agreement.

5. Affordability term.

(Ord. No. 662, § 2, 12-13-23)

The provisions of this chapter are intended to comply with Government Code Section 65915 and related state laws. In the event that any provision of this chapter conflicts with Government Code Section 65915 or any related state laws, the state law shall apply.

(Ord. No. 662, § 2, 12-13-23)