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Home My WebLink About8.2 Second Units Impact Fee CITY CLERK File # D~~o]-~~ AGENDA STATEMENT CITY COUNCIL MEETING DATE: January 16,2007 SUBJECT: Proposed hnpact Fee Assistance Program for Second Units Report Prepared by John Lucero, Housing Specialist and Jeri Ram, Community Development Director ATTACHMENTS: 1. hnpact Fees Applicable to Second Units RECOMMENDATION: ~ 1. of- \ ~. 4. 5. Receive Staff presentation; Deliberate; Direct Staff to proceed with the development of an hnpact Fee Assistance Program for Second Units pursuant to Option 1; OR Select another Option; OR Provide Staff with direction. FINANCIAL STATEMENT: An hnpact Fee Assistance Program for Second Units would be funded from the Inclusionary Zoning In-Lieu Fee Fund. The amount ofthe fee assistance from the Inclusionary Zoning In-Lieu Fee Fund would vary based on the option selected and the number of second residential units that are constructed. PROJECT DESCRIPTION: Background: In 2006 the City of Dublin received three applications for building permits to add attached or detached Second Units to their homes in Dublin. Two ofthe applications are in the Primary Planning Area (west of Dougherty Road), and one is in the Eastern Dublin Specific Plan Area (EDSP A). In November, the first Second Unit was ready for issuance of the Building Permit. After receiving the estimates of charges from the City for the building permit, the Applicant expressed concerns over the amount ofthe hnpact Fees that are imposed and collected prior to the issuance of a building permit. The Applicant indicated that the hnpact Fees created a financial burden and might cause him to not build the Second Unit. On January 9,2007, the Applicant for the second building permit in the Primary Planning Area was informed that the building permit was ready to be issued. When the Applicant learned about the cost ofthe City's hnpact Fees, he indicated that this presented a financial hardship and expressed concerns with the affordability ofthe project. The Applicant indicated that he would have to go forward because he had already purchased a manufactured building to be used as the Second Unit. COPY TO: In-House Distribution 100' ITEM NO. ~.1 K:\Agenda Statements\2006\City Council\SR 2nd unit Impact Fees)-9-07.DOC C- The third application, which is in EDSP A, is still in plan check and not ready for building permit issuance. Staff has been unsuccessful in reaching the Applicant to discuss the hnpact Fees. Impact Fees: While a Second Unit may sound like a small project, hnpact Fees are developed by estimating the ultimate need at City buildout for City infrastructure and services such as fire stations, parks, roadways, civic buildings, and police facilities. Such hnpact Fees apply to all residential development, including the construction of Second Units. After determining the ultimate need, a formula was created that equitably spread the cost of the infrastructure and services for each type ofproject. This analysis was performed in a special study for each type ofhnpact Fee that the City charges. The type of fee study and analysis that is performed is strictly regulated by State law. In addition, hnpact Fees are also charged by other agencies. These agencies require that hnpact Fees be paid by the Applicant prior to the City issuing building permits. Other agencies who charge impact fees include Dublin Unified School District (DUSD) which charges for Second Units over 500 sq.ft.; Dublin San Ramon Services District (DSRSD); and Zone 7. Second Units: Second Units are defined as residential units with separate kitchens, sleeping, and bathroom facilities, which is a part of, an extension to, or detached from, a detached single-family residence, and which is subordinate to the principal residence. (Zoning Ordinance 98.08.020.) Pursuant to the City's Second Unit Regulations, the size of a Second Unit shall be not less than 275 square feet, nor more than 1,000 square feet. (Zoning Ordinance 9 8.80.040.D.) Further, in no case shall a Second Unit exceed 35% of the total floor area ofthe existing single-family residence. (Ibid.) Historically, the State of California has encouraged, by enacting various laws, Second Units in residentially- zoned districts all over the State. The State regulations are implemented through each jurisdiction's Housing Element ofthe General Plan and Zoning Ordinance. As part ofthe Housing Element, policies are set forth to help create new affordable housing and that seek to remove barriers to providing affordable housing. The State encourages Second Units as one way to provide affordable housing. The City of Dublin Housing Element has a Goal, Policy and Program directly related to the development of an hnpact Fee Assistance Program for Second Units: Goal D: To Preserve and increase the efficient use of the City's existing housinf! stock. Policy I: Encourage efficient use of existing housing stock; promote development of small units at low cost. Program D.I.I. To encourage homeowners to create second units with affordable rents for very low-and low-income households, the City will provide financial assistance through its Inclusionary Housing Fund to construct second units in exchange for deed restrictions, limiting rents, and rent increase for 30 years. The City's Second Unit Regulations enable homeowners to apply for building permits for Second Units without going through a public hearing process. The City's building permit review for Second Units includes a review by Staff for consistency with the City's Second Units Regulations and all applicable 2 ~-, building and fire codes. In addition, as noted above, prior to issuance of building permits, hnpact Fees are imposed on Second Units. Inclusionary Zoning: In July 1996, the City Council adopted an Ordinance establishing the Inclusionary Zoning Regulations for the City of Dublin. (Zoning Ordinance Chapter 8.68.) The purpose ofthe Inclusionary Zoning Regulations is to enhance public welfare and assure that further housing development contributes to increasing the production and provide funds for the development of residential units affordable by households of very low, low, and moderate income for ownership and/or rental housing. The City's Inclusionary Zoning Regulations require that a percentage ofthe units be restricted as affordable to very low, low and moderate income households. Over the years, developers have been required to either: 1) build all 12.5 % ofthe total number of units within a development as affordable units; or 2) build 7.5% of the total number of units within a development as affordable units and pay a monetary contribution in the amount of the remaining 5% of the total number of units within the development into the Inclusionary Zoning In-Lieu Fee Fund. Inclusionary units must remain affordable for a period of 55 years, through affordability restrictions recorded against the property. Since 1996, the majority of the production of new affordable units under the Inclusionary Zoning Regulations has been within the EDSP A where most of the new development in the City has occurred. However, the City has used the monies collected in the Inclusionary Zoning In-Lieu Fee Fund to participate in affordable housing projects by providing below market rate loans in both the EDSP A and in the Primary Planning Area. To date, housing developments that have benefited from the Inclusionary Zoning In-Lieu Fee Fund with below market rate loans are: Wicklow Square, an affordable rental senior housing complex, and Fairway Ranch, which includes a multi-family and senior rental housing. In addition, Dublin's First Time Homebuyer Loan Program is funded with Inclusionary Zoning In-Lieu Fee Funds. ANALYSIS: Based on City and other agency ordinances and requirements, Second Units must pay hnpact Fees. The following table sets forth the hnpact Fee requirement for each of the three Second Units that the City has III process: Table 1: Impact Fees for Second Units in Process Project Location Tri- Valley All Non- Total City Plus Other I.D. Transportation TVTD City Impact Fees Impact Fees Development (TVTD) Impact including Fee Fees DUSD, Zone 7 and DSRSD Project 1 Primary Attached Unit: $1,200 $17,699 $18,899 $ 8,423 Planning Area Project 2 Primary Detached Unit: $1,888 $17,699 $19,587 $13,019 Planning Area Project 3 Eastern Detached Unit: $1,888 $31,206 $33,094 $15,515 Dublin Specific Plan Area 3 eo'" The City hnpact Fees for Second Units are calculated based on formulas in each of the City's hnpact Fee Ordinances. A breakdown ofthe hnpact Fees applicable to Second Units is attached to this report (Attachment 1). As noted above, the majority of new developments of affordable housing units have been in the EDSP A. The City Council could, if desired, create a new program for just the Primary Planning Area or' both the Primary Planning Area and the EDSP A that would use monies from the Inclusionary Zoning In-Lieu Fee Fund (per Program D .1.1 of the Housing Element) to pay for all or a portion of the hnpact Fees for Second Units. It is recommended that any program approved by the City Council be limited to in-fill projects only. This would reserve the program for existing City homeowners and keep it separate from the City's Inclusionary Zoning Ordinance. It is anticipated that the majority of requests for Second Units will be from the Primary Planning Area for the following reasons: . Lot Size - In the Primary Planning Area residential lot sizes tend to be larger than in the EDSP A; · Lot Coverage - Due to the larger lot sizes in the Primary Planning Area, a principal residence and second unit are more likely to be possible. In most instances, homes in the EDSP A are built at their maximum lot coverage area; and, . Parking Requirements - Homes in the Primary Planning Area are more likely to have the ability for an extra parking space (as required in the Second Unit Ordinance) than in the EDSP A. Staff is suggesting the following options for City Council consideration: OPTION 1 - Pay a portion of the hnpact Fees from the City's Inclusionarv Zoning In-Lieu Fee Fund in exchange for guaranteeing affordability for a set time period for In-Fill Second Units. The City Council may elect to adopt an hnpact Fee Assistance Program for In-Fill Second Units that would assist applicants of Second Units with the payment ofhnpact Fees. The Inclusionary Zoning In- Lieu Fee Funds could be used to pay all or a portion ofthe required hnpact Fees. This report refers to this as "Fee Assistance." Although the City's Inclusionary Zoning Regulations provides that units must remain affordable for a period of 55 years, the Housing Element provides that the City will provide financial assistance through its Inclusionary Zoning In-Lieu Fee Fund to construct Second Units in exchange for deed restrictions, limiting rents, and rent increase for 30 years. Therefore, the proposed Option 1 applies the 30 year affordability restriction. This Option 1 would reward Applicants who agree to limit the rent to an affordable level for very low and low income individuals. The City of Dublin uses the State of California Housing and Community Development Income Guidelines by County for income and rent thresholds. For very low and low income individuals, rents may not exceed 30% of the maximum income level. Additionally, this Option 1 would provide greater assistance should the Applicant agree to a rental restriction for very low income, and a graduated scale based on length oftime. The longer the unit is rent restricted, the greater the Fee Assistance. Table 2A below illustrates the estimated hnpact Fees supported by various percentages of Fee Assistance for the three Second Unit projects based on the length oftime the unit is rent restricted as affordable to low income households. 4 CO, Table 2A: Impact Fees with Fee Assistance Based on Time of Affordability for Low Income Project I.D. Full Impact Fee Impact fee Impact fee Impact fee with 25% Fee with 50% Fee with 75% Fee Assistance Assistance Assistance No Affordability 15 Years 25 Years 30 Years Affordabili Afford ab ili Affordabili Project One $18,899.00 $14,174.25 $ 9,449.50 $ 4,724.75 Project Two $19,587.00 $14,690.25 $ 9,793.50 $ 4,896.75 Project Three $33,094.02 $24,820.52 $16,547.01 $ 8,273.51 Table 2B below illustrates the estimated hnpact Fee supported by various percentages of Fee Assistance for the three Second Unit projects based on the length oftime the unit is rent restricted as affordable to very-low income households. Table 2B: Impact Fees with Fee Assistance Based on Time of Affordability for Very Low Income Project I.D. Full Impact Fee Impact fee Impact fee Impact fee with 35% Fee with 60% Fee with 85% Fee Assistance Assistance Assistance No Affordability 15 Years 25 Years 30 Years Affordability Mfordability Affordability Project One $18,899.00 $12,284.35 $ 7,559.60 $2,834.85 Proiect Two $19,587.00 $12,731.55 $ 7,834.80 $2,938.05 Project Three $33,094.02 $21,511.11 $13,237.61 $4,964.10 The benefits of this approach would be: · The Fee Assistance Program for Second Units would be consistent with the Housing Element Program D 1.1, which would assist in demonstrating that the City achieved its Housing Element Goals, especially when the upcoming Housing Element Update is reviewed by the State; . Units built under this option could be counted towards the City's Regional Housing Needs Allocation because they would be rent-restricted; . The City's Fee Assistance Program for Second Units may encourage second residential units in the Primary Planning Area where there are not as many affordable units being constructed as in the EDSP A; and, · An increase in Second Residential Units would provide a different type of affordable housing. Some of the concerns related to this approach would be: · If many second units were built, the City would have a reduction in the amount of money available for other affordable housing programs; · This Option 1 does not include Fee Assistance for Second Units that are being constructed as part of a development proposal to satisfy the requirements of the Inclusionary Zoning Ordinance. Developers may wish to take advantage ofthis Fee Assistance Program; however, to do so, there 5 "b" would be a reduction in the overall amount that the City collects for affordable housing. The intent of the Housing Element was not to reduce the amount of money going into the program from developers; rather it was to help create new units in In-Fill areas of the City; · The variety of time periods on affordability will require more monitoring by Staff; and, . As properties resell, new homeowners may not wish to comply with the affordability restrictions under the Fee Assistance Program; thus, ensuring compliance may take more Staff time. The City Attorney has indicated that where excess rent is charged for Second Units subject to the affordability restrictions imposed by the Fee Assistance Program, the City may take appropriate legal action to recover the excess rent charged, as well as any other appropriate remedy. OPTION 2 - Provide Fee Assistance (with Inclusionarv Zoning In-Lieu Fee Funds) for the payment of hnpact Fees based on the proposed size of the Second Unit for Second Units. The rationale for the Fee Assistance provided in Option 2 is that the smaller the square footage ofthe second unit, the less impact there would be on services, therefore, the greater the Fee Assistance. For example, if the unit square footage is: 275 to 500 square feet, the Fee Assistance would be 75% 501 to 700 square feet, the Fee Assistance would be 50% 701 to 1,000 square feet, the Fee Assistance would be 25% Table 3 below illustrates the estimated hnpact Fees for the three Second Unit projects after Fee Assistance based on the size of Second Unit. Table 3: Impact Fees with Fee Assistance Based on Square Footage Project I.D. Full City Impact fee Impact fee Impact fee Impact fees Impact Fee with 25% Fee with 50% Fee with 75% Fee from Other Assistance Assistance Assistance A2encies 701 to 1000 501 to 700 275 to 500 Square Feet Square Feet Square Feet Project One $18,899.00 $14,174.25 $ 9,449.50 $4,724.25 $ 8,423 Proj ect Two $19,587.00 $14,690.25 $ 9,793.50 $4,896.75 $13,019 Project Three $33,094.02 $24,820.52 $16,547.01 $8,273.51 $15,515 A sub-option to this Option 2 would be to restrict the rent to low or very low income households for 30 years, similar to Option 1 above. The benefits ofthis approach would be: · Encourage efficient use of existing housing stock by promoting development of smaller units at a low cost; · Would lessen the financial burden to homeowners that want to provide Second Units; and, · Would provide housing that is "affordable by design" rather than restricted to a certain income range, which would be another alternative type of affordable housing. 6~1 Some of the concerns related to this approach would be: · If many Second Units were built, the City would have a reduction in the amount of money available for other affordable housing programs; · This Option 2 is not consistent with the Program identified in the City's adopted Housing Element because it does not guarantee affordability and units could not be counted towards the City's Regional Housing Needs Allocation; · This Option 2 does not include fee assistance for Second Units that are being constructed as part of a development proposal to satisfy the requirements of the Inclusionary Zoning Ordinance. Developers may wish to take advantage of this Fee Assistance Program; however, to do so, there would be a reduction in the overall amount that the City collects for affordable housing. The intent of the Housing Element was not to reduce the amount of money going into the program from developers; rather it was to help create new units in in-fill areas of the City; and, · The Second Units would not be rent restricted and could be rented at a rate that would not be affordable. However, if the City Council wanted to further explore this approach, Staff could draft a program that restricts the rents for a certain term. OPTION 3 - Forward To Housin2: Committee The Council may elect to refer this matter to the Housing Committee for their consideration. It should be noted that two of the building permits are ready to be issued. The Applicants may be concerned with the delay in the City Council's decision. OPTION 4 - Not Adopt An Impact Fee Assistance Pro2:ram for Second Units The City Council may elect to do nothing and not adopt an hnpact Fee Assistance Program for Second Units. This Option 4 would reserve monies in the Inclusionary Zoning In-Lieu Fee Fund for other programs or assistance. However, a consequence may be that less Second Units would be constructed. Additionally, the option would not be consistent with the goals of the Housing Element, as note above. NEXT STEPS: The City Council should consider the Options listed above and provide Staff with direction. Ifthe City Council were to select Options 1 or 2, Staff would return to Council at a future meeting with an hnpact Fee Assistance Program for Second Units to be adopted by Resolution ofthe City Council and a Budget Change Form, if applicable. If the City Council were to select Option 3, referral to the Housing Committee, Staff would schedule the item for the next possible Housing Committee Agenda. RECOMMENDATION: Staff recommends that the City Council 1) Receive Staff presentation; 2) Deliberate; 3) Direct Staff to proceed with the development of an hnpact Fee Assistance Program for Second Units pursuant to Option 1; OR 4) Select another Option; OR 5) Provide Staff with direction. 7 "b .., IMPACT FEES APPLICABLE TO SECOND UNITS 100' hnpact Fees were established to pay for the design, development and construction of public improvement projects for: streets; public facilities; parks; and fire capital expansion projects. The amounts charged for hnpact Fees are dependent upon the type and size of a particular development and are based upon related studies, conducted prior to the adoption of the fees. Fees are updated on an annual basis based upon various cost indexes. The hnpact Fees for low density, single detached homes in the Primary Planning area include: Land, Community Parks Fee hn rovements, Community Parks Community Buildings Libraries Civic Center Traffic hn act Fees Tri-Valley Transportation Development Fee (this fee varies) Fire hnpact Fee TOTAL $6,921 $4,157 $2,732 $1,075 $328 $1,616 $1,200 or $1,888 (attached vs. detached) $870 $18,899 or $19,587 (attached vs. detached) The hnpact Fees for the Eastern Dublin Specific Plan area include: Land, Community Parks Fee $6,921 hnprovements, Community Parks $4,157 Community Buildings $2,732 Libraries $1,075 Civic Center $328 Tri-Valley Transportation Development Fee (this fee $1,200 or $1,888 (attached vs. detached) varies) Fire hnpact Fee $870 Neighborhood Parks, Land $4,060 hnprovements, Neighborhood Parks $1,801 Aquatic Center $463 Freeway Interchange Fee $289.28 Traffic impact Fee - Category 1 $5,752 Traffic hnpact Fee - Category 2 $1,517 Traffic hnpact Fee - Category 2 (BART) $1,236 Noise Mitigation Fee $4.74 TOTAL $32,406.02 or 33,094.02 (attached vs. detached) ATTACHMENT 1 -€:2. \-\la-01