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AHOZ Staff Reportwe F MEETING DATE: 10/15/2012 STUDY SESSION WI ios aASOa COUNCIL AGENDA REPORT DATE: October 10, 2012 TO: MAYOR AND TOWN COUNCIL FROM: GREG LARSON, TOWN MANAGER SUBJECT: AFFORDABLE HOUSING OVERLAY ZONE STUDY SESSION DISCUSS AND PROVIDE FEEDBACK REGARDING THE AFFORDABLE HOUSING OVERLAY ZONE (AHOZ), INCLUDING DEVELOPMENT STANDARDS AND DESIGN AND SITE GUIDELINES FOR FIVE PROPERTIES AT VARIOUS LOCATIONS IN LOS GATOS GENERALLY LOCATED AT: THE CORNER OF CAPRI AND KNOWLES; ONE PROPERTY EAST OF WINCHESTER AND KNOWLES; THE WEST SIDE OF OKA ROAD; AND TWO ON THE EAST SIDE OF OKA ROAD, THE ASSESSOR'S PARCEL NUMBERS ARE: 406 -28 -032, 424 -32 -069, 424 -08- 074, 424 -08 -057, and 424 -08 -021. BACKGROUND: State law requires local governments to adequately plan to meet their existing and projected housing needs, including their share of the regional housing need, which is known as the Regional Housing Needs Assessment (RHNA). Housing law is the State's primary market -based strategy to increase housing supply, affordability and choice. The law recognizes that in order for the private sector to adequately address housing needs, local governments must adopt land - use plans and regulatory programs, such as the AHOZ, that provide opportunities for housing development. While State law specifies the analyses, assessments, and programs required for Housing Elements, it defers to the local government on how it meets its fair share of regional housing needs. Often local governments will rezone residential, industrial or commercial lands to high density residential to meet the fair share housing numbers. As an alternative to large scale rezoning, the Town chose to develop an affordable housing overlay zone (AHOZ), which is a relatively new concept that is gaining interest, particularly in built -out communities. In March 2012, the Town Council adopted the 2007 — 2014 Housing Element, which included Action Item HOU -2.1. HOU -2.1 requires the Town to amend the PREPARED BY: �Wendie R. Rooney, Strategic Project Director Reviewed by: Assistant Town Manager Town Attorney Finance NADMTC REPORTS\2012Wffordable Housing Overlay Zone Study Session 10- 15- 12.doe Refomnatted: 5130/02 PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: AFFORDABLE HOUSING OVERLAY ZONE October 10, 2012 Town Code to include an Affordable Housing Overlay Zone consistent with the following action item: HOU -2.1: Affordable Housing Overlay Zone: Amend the Town Code to include an Affordable Housing Overlay Zone (AHOZ), which will permit development of a property with owner - occupied or rental units at densities of a minimum of 20 units per acre by right, without discretionary review, and amend the zoning map to apply the AHOZ to each site identified in the Housing Sites Inventory while leaving the existing zoning in place as the base zone. The Town will develop new development standards specific to the AHOZ that allow for a minimum of 20 dwelling units per acre. These development standards will be similar to standards found under the RM zone such as: Allowing for a building height of at least three stories; Requiring no more than 1.5 parking spaces per unit; and Ensuring that the project design is compatible with its surroundings. A landowner may choose to develop a property consistent with either the base zoning or the AHOZ. The Town will monitor the development of sites within the AHOZ. If sites are developed without use of the overlay, the Town will designate additional AHOZ sites as needed. The AHOZ will include the following incentives and requirements: Require that a minimum of 50 percent of housing units be affordable to households at the moderate income level and below for housing projects in the AHOZ; Allocate 20 percent of the Los Gatos Redevelopment Agency Housing Set -Aside Funds and the Town's BMP funds for affordable housing projects in the AHOZ; and (This is no longer applicable due to the dissolution of Redevelopment Agencies and will be removed in the final Element). Defer building plan check and inspection fees until units in an AHOZ project are occupied. The AHOZ does not result in rezoning the properties. The property owners have the right to develop the properties under the existing zoning and General Plan designation or use the AHOZ development standards, but not a combination of both. The AHOZ contains development standards (setbacks, building heights, parking ratios, etc.), densities, affordability targets or ratios, incentives, and architectural and site standards. The development standards, densities and affordability ratios vary on each of the five AHOZ sites. The AHOZ is applied to the following five properties (Attachment 1): Property Location Assessor's Parcel No. Size acres Former Courthouse and County Office Knowles Drive and Capri Drive 406 -28 -032 5.2 Southbay Development — rear parcel Knowles Drive and Winchester 424 -32 -069 7.1 Oka Road Site A Oka Road next to JCC 424 -08 -074 6.4 PAGE MAYOR AND TOWN COUNCIL SUBJECT: AFFORDABLE HOUSING OVERLAY ZONE October 10, 2012 Oka Road — Site B Oka Road east of Site A 424 -08 -057 3 Oka Road — Site C Oka Road behind Site B 424 -08 -021 3 These five sites represent a 50 percent reduction in the amount of properties originally identified to have the AHOZ applied to them. The 2007 -14 Housing Element was under General Plan Committee (GPC) review when the 2020 General Plan Environmental Impact Report (EIR) was certified in September 2010. The General Plan EIR identified and analyzed the impacts on ten potential sites for AHOZ designation. Through the GPC's refinement of the AHOZ, five of the 10 properties were removed from the list of potential sites. These properties included Ditto's Lane, two former South Bay Honda lots, the former Bentley Auto Dealership on Blossom Hill, and the former Swanson Ford site. It is important to recognize that State Planning and Zoning laws regarding Housing Elements does not require each local government to guarantee construction of the number of units allocated through the RHNA. However, local governments are required to provide adequate opportunities for housing development on suitably zoned sites with available infrastructure. The Town's adjusted 2007 -14 RHNA is 452 units in five income categories, including extremely low, very low, low, moderate and above moderate. Since November 2011, the GPC has been working with staff and the Town Architect on the AHOZ development and design standards. The GPC finished its work in August 2012, with the completion of the Draft "Affordable Housing Overlay Zone Design Guidelines" (Attachment 15). Implementation of the AHOZ requires Amendments to the General Plan, Town Code Text and Zoning Map to incorporate the development standards. The Planning Commission and the Town Council will consider these applications in December and January. Finally, based on its review of the draft AHOZ general intent, development standards, and proposed incentives, on September 20, 2012, the State Department of Housing and Community Development certified the Town's Housing Element as fulfilling State Planning and "Zoning law. DISCUSSION: This section will cover the following topics: 1. AHOZ Goals; 2. Application of the AHOZ; 3. AHOZ Development Standards and Affordability Ratios; 4. Incentives and Process for Securing Incentives; 5. Affordable Housing Overlay Zone Design Guidelines; and 6. GPC Review and Recommendation PAGE MAYOR AND TOWN COUNCIL SUBJECT: AFFORDABLE HOUSING OVERLAY ZONE October 10, 2012 1. AHOZ Goals: There are four principal goals associated with the AHOZ. The first is to ensure that the Town meets its state housing law RHNA obligation, while reserving other potential AHOZ sites for the next RHNA allocation, which will occur in the 2014 to 2022 cycle. Consequently, the GPC recommended removing a number of the sites that were previously considered for the AHOZ designations. These sites, as well as the remaining recommended AHOZ sites that are not developed in the 2007 -14 RHNA Cycle, can be used to meet the upcoming 2014 -22 RHNA allocation of 617 units. The second goal is to create development standards and incentives that offer advantages that are similar or slightly better than the State Density Bonus Program to effectively preclude the use of it on the five AHOZ sites. While meeting the intent of the Housing Element Action HOU -2.1, the GPC carefully considered the maximum density that each of the AHOZ sites could accommodate while ensuring neighborhood compatibility, maintaining consistency with the Town's high standards for new development, and minimizing impacts, such as traffic and schools. The addition of up to a 35% density bonus from the State Density Bonus Program could result in densities that would be inconsistent with the Town's goals of neighborhood compatibility, quality development, and minimizing impacts. The communities of Corte Madera and Tiburon successfully used this same approach with their AHOZ, and as noted, the State Department of Housing and Community Development has certified the Town's Housing Element which clearly articulated this goal. If a developer were to request the State Density Bonus Program, the density bonus would be based on the property's underlying density rather than the AHOZ. The third goal is to ensure that AHOZ development would have the same architecture and site qualities of existing Town residential projects. Consequently, the Town Architect prepared, for the GPC's review and consideration, Architectural and Site standards that will be used to guide and evaluate new development. In addition to providing site planning, parking, private open space, architecture and landscaping standards, the Affordable Housing Overlay Zone Guidelines demonstrate that the each of the sites can accommodate a variety of housing types at various densities. Consistent with the Town's philosophy of creating mixed income housing developments, the fourth goal is to require that each of the sites contain residential units that meet all required RHNA income categories. Consequently, each site is required to provide units for very low and below, low, moderate and above moderate income residents. 2. Application of the AHOZ: The AHOZ was specifically designed to not rezone the five properties where the overlay is applied. By leaving the existing zoning intact, the property owner is able to develop either under the existing zoning and applicable development standards or under the AHOZ, but not a combination of both. In the case of the five properties, the Courthouse is zoned Office, Southbay Development is zoned Commercial Manufacturing, and the three Oka Road properties are zoned residential. With the exception of the Courthouse property, the AHOZ also does not replace any of the existing General Plan Designations. As a former public institutional use, the PAGES MAYOR AND TOWN COUNCIL SUBJECT: AFFORDABLE HOUSING OVERLAY ZONE October 10, 2012 Courthouse property has a Public General Plan Designation. It is recommended that this property be changed to an Office General Plan Designation concurrent with the General Plan Amendment to incorporate the AHOZ into the Housing Element. The Office designation is more consistent with the surrounding uses to the west and north and will allow either office or residential development consistent with the Town Council's intent for the property. The Council formally documented its intent for this property through Resolution 2011 -063 (Attachment 2). To further encourage the property owner to utilize the AHOZ, the Town is processing all the necessary applications to implement the AHOZ, including the General Plan Amendment to the Housing Element to establish the overlay, a text amendment to the Town Code to incorporate the AHOZ development standards and affordability ratios, and a Zoning Map amendment to incorporate the AHOZ overlay on the five properties. As noted above, a General Plan Amendment to redesignate the former Courthouse and County office building property is also proposed with the implementation actions. Lastly, the Town has processed an Addendum to the General Plan Environmental Impact Report (EIR) to assess whether the removal of five of the previously identified 10 sites from the AHOZ and the potential additional units on two of the remaining five sites through granting a density bonus and higher base density on the Southbay Development site would create any additional impacts that were not anticipated in the General Plan EIR. A traffic analysis was conducted and the removal of the five sites and the potential additional units on the Southbay Development and Courthouse properties resulted in a maximum of seven additional units over the number that was studied in the General Plan EIR. No new impacts were identified, and accordingly the Town is processing an Addendum to the EIR. If the aforementioned actions are approved, an AHOZ site applicant would be responsible for processing an Architecture and Site application and any applicable site - specific environmental documentation. 3. AHOZ Development Standards and Affordability Ratios: Attachment 3 contains a table of the proposed key development standards and affordability ratios. Using the Town's existing Multi- family (RM) development standards as a starting point, the GPC thoroughly analyzed each of the five sites and made adjustments to the development standards as needed in response to the surrounding neighborhood character, transit accessibility, site characteristics and AHOZ goals. The GPC recommended using the RM standards for lot coverage and property setbacks. The GPC further suggested some minor changes to the RM building height to allow extra height for garages that are integrated into the structure (first floor of a 3 -story Townhome, subterranean, or podium) and to the parking standard. As discussed further in the "Incentives Subsection," a potential developer would be allowed to modify some of the development standards if it is selected as one of the automatically granted incentives. PAGE 6 MAYOR AND TOWN COUNCIL SUBJECT: AFFORDABLE HOUSING OVERLAY ZONE October 10, 2012 The affordability ratios were determined based on the RHNA income allocation and the Town's long standing policy of creating mixed income developments. The GPC recognized that the subsidized units may be smaller and have less amenitized interiors, but the exteriors would be consistent with the non - subsidized units in terms of quality of materials and architectural style. The GPC recommended that the Town allow minor adjustments to the affordability ratios for each of the sites if needed to help make a viable project, as long as the overall RIINA income ratios allocated to the Town are achieved. The GPC recommended two additional modifications to the development standards. As noted in Attachment 3, the GPC recommended allowing flexibility in cases where increased building height may be appropriate, such as the Southbay Development site, which is adjacent to the taller Aventino Apartments and Netflix developments. The GPC recommended deferring a decision on whether to grant additional height to the Planning Commission during the Architecture and Site application process. In approving a higher building, the Planning Commission would need to make the following findings: 1. The building massing and dimensional ratios of building components create a harmonious visual balance and contribute to the architectural rhythm; and 2. The height increase is necessary to achieve excellence in architectural design and cannot be accommodated through alternative means such as lowering the building into the ground or reducing overall floor to ceiling heights. The GPC also recommended deferring to the Planning Commission during the Architecture and Site review process consideration of the plan for integrating the subsidized units with the market -rate units. Although the Town typically requires subsidized or affordable units to be integrated with the market rate units, the Committee recognized that there may be cases where a developer proposes a stand -alone affordable component, such as an affordable senior apartment development, adjacent to the market rate multi - family or single - family units rather than integrating the two types of units. This separation may be needed to ensure the financial feasibility of the plan. Please see Attachments 4 - 14 for a thorough review of the GPC's discussions during the drafting of the AHOZ. 4. Incentives and Process for Securing Incentives: As previously noted, one of the Town's goals for the AHOZ is to provide development standards and incentives to ensure the AHOZ sites offer similar or greater advantages than the State Density Bonus Law. The overall intent is to provide sufficient incentives to a developer who is willing to meet all the AHOZ requirements and to preclude the developer from using the State Density Bonus program in combination with the AHOZ. If a developer wants to use the State Density Bonus program, the density bonus would be based on the property's existing zoning and General Plan designation. By precluding the use of the State Density Bonus Program, the Town is able to better envision the type of development and ensure that it is consistent with existing Town residential development and site and architecture standards. PAGE 7 MAYOR AND TOWN COUNCIL SUBJECT: AFFORDABLE HOUSING OVERLAY ZONE October 10, 2012 The State Density Bonus Program requires an automatic granting of up to three incentives. Pursuant to the State Density Bonus law, an incentive is a reduction or waiver in development standards. The GPC is recommending automatically granting four incentives for a development that meets all the stated intents of the AHOZ. The incentives would be selected from the three following categories: (A) Development Standards, (B) Processing Procedures, and (C) Financial. Each is explained in the following and the applicant has full discretion on which incentives to select. A. Development Standards • Parking Reduction: allow one space per unit for senior, persons with disabilities and development within 1/4 mile to the proposed Vasona Light Rail Station. Allow a reduction to 1.3 space per unit for the Southbay Development Property due to its proximity to the planned Vasona Light Rail Station. • Density: Allow up to a 20% density bonus on the Southbay Development and Courthouse Properties. • Setback Reduction: Allow up to a 50% reduction on not more than two property line setbacks. • Lot Coverage: Allow an increase in lot coverage up to 50% maximum. B. Processing Procedures ® Priority processing for Planning and Engineering Division's Architecture and Site review. ® Priority building plan check and inspections processing. C. Financial Incentives • Waiver of Planning and Engineering Architecture and Site application fees. This would apply to all fees except for those that are paid to the Town's technical consultants. • Waiver of building plan check and inspection fees. This would apply to all fees except for those that are paid to the Town's technical consultants. The offering of financial incentives would be a change to current Town policy. Historically, the Town has not offered financial incentives to encourage any types of land uses. While this would be a change to current Town policy, offsetting financial costs is a very common incentive that municipalities offer to affordable housing developers. The Town could offset the waiver of permit fees with BMP funds or General Fund. Alternatively, the Town could defer the fees until the units sell to reduce the upfront development costs. In this latter case, municipalities generally require payment at the close of escrow for the particular unit. PAGE 8 MAYOR AND TOWN COUNCIL SUBJECT: AFFORDABLE HOUSING OVERLAY ZONE October 10, 2012 The GPC further recommended the following processes and procedures to encourage AHOZ development. These would be automatically provided to the applicant. • Pre - application Conference: The Town would allow (and encourage) pre - application conferences. While this is currently allowed/encouraged, the Town has limitation of how much time staff can spend in this capacity without compensation to the Town. This concept would remove that time restriction for the five AHOZ sites if planned for affordable housing. • Deferral of planning, engineering and building fees to final occupancy of the residential units. Currently, these fees are due when the permit is issued. 5. Affordable Housing Overlay Zone Design Guidelines: The Guidelines were originally created to demonstrate that a variety of quality residential products of varing densities could be accommodated on each of the five AHOZ sites. The GPC felt that the Guidelines provide a good example of the Town's expectations for the AHOZ. However, the Committee wanted to allow flexibility and not constrain any potential AHOZ developer by requiring that only these types of housing units could be built. The Guidelines provide general sound site planning and architecture direction as well as site specific Guidelines for each of the five properties. The site specific guidelines are in response to each property's physical setting, the surrounding neighborhood, nearby uses, and environmental constraints, such as traffic and schools. Finally, the Guidelines are intended to help direct the applicant's architecture and site planning design process and would be used by staff and the decision makers when reviewing an AHOZ Architecture and Site application. 6. GPC Review and Recommendation: The GPC spent considerable time analyzing and discussing the various concepts presented in this report. In all, the GPC held 11 meetings between November 2011 and August 2012. All meetings were advertised and generally did not have many public members attend. The Committee heard presentations from affordable housing developers and potential AHOZ developers. The Committee spent considerable time discussing and debating the various housing types presented in the Guidelines and ultimately decided to not remove any of the examples, but instead encourage potential developers to use the Guidelines as an illustration of the architecture and site planning qualities that the Town will require for future development of these sites. As previously noted, the minutes from each of these meetings are contained in Attachments 4 - 14. While not every detail was unanimously agreed upon, the Committee found that the AHOZ development standards, incentives, and the architecture and site guidelines meet the Town's goals for the program; the Housing Element Action HOU -2.1; and could result in providing needed quality affordable housing for Town residents. The GPC unanimously recommended approval of the AHOZ implementing actions and the draft "Affordable Housing Overlay Zone Design Guidelines." PAGE 9 MAYOR AND TOWN COUNCIL SUBJECT: AFFORDABLE HOUSING OVERLAY ZONE October 10, 2012 CONCLUSION: The AHOZ meets the Town's goals of the achieving compliance with the RHNA; could provide quality mixed income residential development; and is consistent with the Town's recently adopted and State Certified Housing Element. The GPC spent considerable time thoroughly analyzing and discussing the development standards, affordability ratios, incentives, and architecture and site guidelines. Based on its extensive review and modifications, the GPC ultimately unanimously recommended approval to the Planning Commission and Town Council of the AHOZ implementing actions and the draft "Affordable Housing Overlay Zone Design Guidelines." The formal adoption process will begin in December with a Planning Commission public hearing and Town Council public hearing in January. The implementation of the AHOZ will establish a base from which to develop the next Housing Element that will commence in 2013/2014. FISCAL IMPACT: The AHOZ was developed primarily by Town staff with assistance from the Town Architect. The General Plan Implementation Fund was used to finance the "Affordable Housing Overlay Zone Design Guidelines." Attachments: 1. Housing Element Housing Opportunity Sites (5 AHOZ Sites highlighted in blue) 2. Resolution 2011 -063 (Courthouse Property) 3. AHOZ Key Development Standards and Affordability Ratios 4. GPC Minutes November 9, 2011 5. GPC Minute January 25, 2012 6. GPC Minutes February 22, 2012 7. GPC Minutes March 14, 2012 8. GPC Minutes March 28, 2012 9. GPC Minutes April 11, 2012 10. GPC Minutes April 25, 2012 11. GPC Minutes May 9, 2012 12. GPC Minutes May 23, 2012 13. GPC Minutes June 13, 2012 14, GPC Minutes August 8, 2012 15. 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