Affordable Housing: Past, Present and Future

Housing jurisdictions must show suflicient progress in meeting 6th cycle Regional Housing Needs Allocation mandates or they risk being fined or losing local authority over their housing programs. The City of Petaluma agrees that there are state requirements to demonsffdte progress toward meeting each cycles Regional Housing Needs Allocation (RIINA). Typically this reporting is through the preparation and submission of an Annual Progress Report demonstrating both production of housing units toward meeting RHNA but also implementation of key programs adopted to facilitate compliance with state mandates RI{NA. The City of Petaluma has a good track record of submitting the annual reporting requirements to maintain the certification of its Housing Elements. Petaluma has seen consequences of not ddequately producing housing units at the lower income level during the 5th cycle, resulting in the mandated ministerial processing of housing projects under SB 35 and is qware thot similar consequences are outlined by the State of California for jurisdictions failing to demonstrdte sulfrcient progress in meeting local RHNA during the upcoming dh cycle.

Sonoma County and its nine Cities have olficially recognized the need for Affordable Housing but not all have fully endorsed the Regional Housing Needs Allocation or met earlier goals. The City of Petaluma disagrees partially with the finding. The City of Petaluma and other jurisdictions in Sonoma County have recognized the need for affordable housing and taken strides to facilitate affordable housing to meet the needs of Sonoma County residents and implement state mandoted RHNA across all income categories. I{hile the City of Petaluma and other Sonoma County jurisdictions have been actively promoting needed resources and tools to facilitate the planning for, production of, and preservation of housing, not all jurisdictions have been successful in meeting the 5th cycle RHNA. The faiture to produce housing units across all income categories to meet 5'h cycle RIINA does not lepresent an unwillingness to 'fully endorse " the RHNA.

Some cities hinder the development of Affordable Housing through designation of new historic districts, increased landscaping requirements, highly restrictive zoning, and exploitation of environmental concerns. The City of Petaluma disagrees wholly with the finding as it relates to Petalumo. The City of Petaluma has consistently supporled affirdable housing development and sought new strotegies and innovalive approaches to increase and focilitate affordable housing. While unable to respond for all cities within the State of California, the City of Petaluma has unequivocally not sought to hinder the production of affordable housing through adoption of new zoning regulations.

Public acceptance of the need for Affordable Housing is not universal; NIMBYism and misinformation can negatively impact the planning and development process. The City of Petaluma agrees with the finding. The term "universal" is general and there have been publicized reporting of examples of public objection to affordable housing in Califurnia cities. That said, the City of Petaluma generally has a record of strong public acceptance of lhe need for affordable housing to meet the housing needs of Petalumans. While NIMBYism has been an obstacle in the entitlement process for some housing development in Petalumd the issue has rarely been rooted in the affordability of the proposed housing.

In Sonoma County, costs and availability of land, building supplies, and Iabor impede development and construction of Affordable Housing. The City of Petaluma agrees with the finding. Sonoma Counly has a strong commitment to urban growth boundaries and community separators to ensure preservalion of open spaces and avoid urban sprawl. One result of that commitment is a defined and limited boundary for development. Additionally, the cost of building supplies and limited availability of labor has significantly increased cost to lhe construction ofaffordable housing in the region.

There is great variability in the planning and approval processes and procedures for developing Affordable Housing in the County and its Cities, thus complicating and slowing development. The City of Petaluma disagrees portially with the finding. While aclotowledging that there is variobility in the planning and approt al processes in each Sonoma County jurisdiction, that does not necessarily complicate or slow down development of housing. Each jurisdiction is responsible for ensuring that the development within its local boundaries is responsive to the communily's housing needs balanced wilh lhe community's vision. One size does not fit all communities and it is vital that local jurisdictions retain local discretion to ensure that the uniqueness and individuality of their community is preserved, enhanced, and evolves consistent with the community's vision. The local discretion should not intentionally complicate or obstruct the production of needed affordable housing in each jurisdiction ond it is up to the individual city/county to develop tools to facilitote much needed housing while respecting community character, desired engagement, etc.

Financing of Affordable Housing projects ts unusually complex, slow, and uncertain. The City of Petaluma agrees wilh lhe Jinding. The City of Petaluma has a strong hislory of working in partnership 1'rith our affordable housing providers lo gain funding lo finance affordable housing projects. The City of Petaluma has a good track record of awarding local funding to help make other funding applications more competilive for our affordable housing providers. When appropriate lhe City of Petaluma has partnered with affordable housing providers for funding awards to cover ancillary aspects such pedestrian network improvements, enhanced lransit opporlunities, and infrastructure investment. City staf regularly prioritizes production of necessary local reporting, letlers of support, and other documents for grant applications os requested by afordable housing providers.

Funding of Affordable Housing is often directed to specific groups such as seniors, veterans, or agricultural workers. The City of Petaluma agrees with the Jinding. However, the use of the term "often" is general and not defined. Therefore, the Cily does nol have a way, other than via anecdotal observation, to confrm that funding is "ofien" directed to speciJic groups. The city funding is generally targeted based on Area Median Income (AMI) levels, and additional project funding is usually obtained with torgete d funding/grant opportunities.

Design review and project approval are often slow and very complex, and hinder the development of Affordable Housing. The City of Petaluma disagrees partially with the finding. llhile an onerous design review can hinder development, the City of Petaluma has worked closely wtth affordable housing providers to expedite processing of applications for affordable housing projects. Both through the use of state ministerial review to reduce processing times and through the use of applicoble environmental exemptions staff has lookcd for ways to efliciently reduce the complexity and increase the fficiency in order lo permit affurdable housing projects. However, the terms "slow" and "very complex" are un-deJined and subjective, so it is nclear at \ehat poinl the Grand Jury would consider this issue lo have been solved. FlI. The permitting regulations, processes, and fees differ by jurisdiction. The City of Pelaluma agrees with the finding. There are nuanced dffirences in entitlement review, internal processes, and adopted fees struclures between nine Sonoma County cities. However, it is common to consult wilh our neighboring jurisdictions when looking to update fees or consider process revisions to learn from what other cities are doing and whether adopting something similar would be beneJicial to the City of Petaluma.

Mitigation fees varT by individual projects and jurisdictions, complicating the building of Affordable Housing, The City of Petaluma disagrees partially with the finding. It is true that mitigation fees vary by individual projects and jurisdictions. The City is unclear what the nexus is between thal facl and the "complicating the building ofAffordable Housing" that is referenced in the finding. Fl3. The speed of issuing permits has improved in some jurisdictions, but greater efliciency would help meet the building needs of Sonoma County. The City of Petaluma agrees with the fnding. The Cily of Petaluma recognizes thot increased fficiency in review and issuance of permits is vital to projects moving forward. This is especially true with affordable housing projects ofen with tight timelines relaled to grant funding or limited resources to go through multiple rounds of review. W'hile there is recogTrition and steps have been taken to increase processing times, fasler more streamlined review is always the objective and assumed lo always assist in furthering construction of housing in Sonoma County.

Payment of in-lieu fees to the housing jurisdiction results in fewer inclusionary Affordable Housing units and houses being built. The City of Petaluma agrees with this finding. The cost of resifuntial developmenl continues to increase with minimal if any discounl for an affordable versus marlrtt rate unit. Despite local increases in in-lieu fees by individual jurisdictions, the fees do nol recoup the increasing construction costs. For this reason, in 2018 the City of Petaluma updated their local inclustonary housing ordinance to eliminate the option of payment of housing inJieu fees and requiring onsite inclusionary housing equal to l5(% of marktt rate units. Under the currenl ordinance, a 100-unit market rate apartment development is required to include 15 affordable units split between the low and very low income categories. Based on the qverage per unit construction cost of $700,000 the City would need to charge $10,500,000 in in lieu fees to construct l5 units of affordable housing. However, the City of Petaluma recognizes thot in lieu fees play an important role in a holistic local housing program in that the City needs housing funds to award to offordable housing providers to demonstrale local match and help affordable housing projects be more competitive for outside funding. h is thought that a local match can be leveraged to multiply each dollar by four. Fl5. Development of commercial projects such as hotels and big box stores is often favored over housing due to lesser demand on public serrices and increased sales or occupancy tax revenue. The City of Petaluma disagrees v,ith the rtnding. While il is true thst hotel and retail projects can generate significanl tox revenues for cities, there is not d trdck record of commercial projects being fovored through the development review process in Petaluma. As previously stated, the City of Petaluma is nol overse to affordable housing development at the community leyel nor al the political level.

Recent legislation encourages construction of transit-oriented infill housing but has yet to show a large effect. The City of Peloluma agrees with the Jinding. Sonoma Counly has not historically had a particulorly dense developmenl paltern which has made creation of a transit system more dificuk. The commencement of SMART service along the Highway l0l corridor along with various bus service in the County has begun to provide transit options for Sonoma County residents. However, there is great room to expand and augment existing service to makc transit a more viable option for residenls. Additionally, much of the funding opportunities from the State to facilitate the development of TOD infill housing has been structured in such a wqy that Sonoma County often does score competitively. For instonce, there are ofien locational requiremenls that a developmenl must be located near "high quality transit" to qualify for funding, but the design of SMART on the single rail corridor does not provide the option ofseryice with l5 minule headways.

Changes to city boundaries by annexation of land within their Spheres of Influence could allow the development of more Affordable Housing but is resisted due to the high costs of additional infrastructure. The Cily of Petaluma disagrees partially l.eith the Jinding. The City acknowledges that there are parcels that lie outside of Pelaluma City Limits but within the Urban Growth Boundary that could be developed for housing. However, many if not all of these parcels present site-specific challenges to developmenl of affordable housing. Most of the parcels available for annexation dre not proximate to transit or seryices and ore often within areas of high VMT ("vehicle miles travelled"). Additionally, many of the available parcels have environmental challenges such as steep topogrdphy or within flood prone areas that further challenge development of affordable housing. The cosl of infrastructure may be an added challenge for development of lhese parcels, but it is not clear that is the primory reasonfor poslponing annexation requests.

The time periods for which new Affordable Housing units cannot convert to market- rate prices have been lengthened to preserve the units as Affordable. The City of Petalumo ogrees with the finding. There have not been significant changes to the City of Pelaluma's required affordability term for deed restricted affordable housing. However, it is relatively common for the City of Pelaluma to partner with the Sonoma County Housing Land Trust for oversight and management of inclusionary housing unils as part of morket rate housing development. The standard lerm of the SCHLT model is 99-year ground lease which is significantly longer than lhe City's required afordability term of 15 years for rental and 55 years for ownership. Obviously a longer affordability term ensures that the units are kept affordable for a longer period of time which is a plus for ensuring available units to those in need.

Rehabilitation and the repurposing of existing properties both preser-ve and increase the supply of Affordable Housing. The City of Petaluma agrees with the finding. The city has an active program thdt is focused on rehabililalion of existing properties. The city worlcs in parlnership with Rebuilding Together Petaluma. An orgonizotion focused on providing health, safety and accessibility improvements for low-income homeowners. A second example is lhe city recently partnered with Burbank Housing and provided funding for a suhstantial rehab of the 89-unit low-income rental community, Old Elm Village. The city is currently working on a project lhat will repurpose an existing 60-unit hotel to 60 units of permanent supporlive housing for chronically homeless members of the community.

Inclusive Affordable Housing must be equivalent to market rate units and be dispersed throughout a project making it harder to identifu and stigmatize them. The City of Petaluma agrees with the finding. The City of Petaluma's inclusionary ordinance (Implementing Zoning Ordinance Section 3.040) specifies that inclusionary units must be: Constructed and occupied concurrently vlith or prior to the construction and occupancy of the market rate residential units in the project, unless an alternative schedule based on extenuating circumstonces is odopted as part of the project approval. In phased projects inclusiondry units shall be constructed and occupied in proportion to the number of units in each phase of the project; distributed throughout the residential project site, to the fullest extent prdcticable; and have comparable and compatible design, qppearance and general quality to the design of the morlret rote units os determined through the Site Plan ond Architectural Review process, provided that all other zoning and building codes ore met.

I (we) agree with the findings numbered:FL,F2, F5, F6, F8, F9, FLl, F13, FI4, Fl6, Ft8, FzO, F2l,

I (we) disagree wholly or partially with the findings numbered: F3, F4, F7, FlO, Ft2, F1-s, F17, F!9, F22, F24 (Attach a statement specifying any portions ofthe findings that are disputed with an explanation of the reasons.)

Vacation homes, time shares, Airbnb, Pacaso houses, and vacant houses reduce the number of units available to permanent residents and, by reducing supply, increase the cost of housing. The City of Petaluma agrees with the finding. A proliferalion of conversions can reduce housing supply which in turn can increase the cost of housing. The City of Petaluma has limited the ability of accessory dwelling units to be used for short term rentals to ensure lhat new ADUs developed under newer regulations are infact added to the City's housing supply and not built to facililate vacation rentals. The City of Petaluma has not seen on undue concentration of vacation rentals to believe that they have caused on acute reduction in housing supply in the City. City of Petaluma Responses to Recommendations