Receive report and provide direction.

Because Carmel-by-the-Sea is facing a loss of discretionary review powers under these circumstances, the adoption of objective design standards would mitigate the potential impact of by-right approvals.  Adopting objective design standards ensures that local control is retained over the design of these sites if an application is submitted for a housing project that includes at least 20 percent affordable units. The creation of objective design standards would occur through a public process in collaboration with the community and would be reviewed by the Planning Commission and adopted by the City Council. Without objective design standards in place, the City will lack a mechanism to control building design and materials, landscaping, or any other principles currently supported by the City’s Design Guidelines

Recommendation: Keep Program 1.4.B and develop objective design standards for projects with at least 20% affordable multi-family housing.

3. Policy Question: Should we keep a vacancy tax on the list of potential options in Program 2.1.D: Establish Affordable Housing Trust Fund?

Concern: Imposing a vacancy tax on seasonal/vacation homes infringes on private property rights.

Response: A vacancy tax is one of many potential options that could be explored over the next 8 years (2023-2031) to fund, wholly or in part, an Affordable Housing Trust Fund. Exploring the feasibility of adopting a vacancy tax demonstrates to the State HCD that we are open to considering various funding streams.  If it is determined that a vacancy tax only applies to Charter cities and not General Law cities like Carmel, or if the courts find vacancy taxes to be unconstitutional, or if we simply conclude it is not an appropriate tool for Carmel, we would cease exploration of the concept and report our findings to HCD. It is important to understand the commitment to explore is not a commitment to adopt a vacancy tax.

Recommendation: Remove vacancy tax from Program 2.1.D as a potential funding source for an Affordable Housing Trust Fund.

4. Policy Question: Should Program 3.1.A: Mixed Use Affordable Housing be modified to remove consideration of a third story when devoted to affordable housing?

Concern: Two and three-story buildings downtown may negatively impact Carmel’s character.

Response: Two-story buildings are a common feature of the downtown and are allowed (and always have been allowed) throughout the commercial districts. Encouraging the addition of a second story to one-story buildings would add housing and, in many cases, would serve to improve the aesthetics of the downtown by shielding rooftop mechanical equipment and unsightly adjacent blank walls. Two examples of this existing condition are the Carmel Realty building at the northeast corner of Dolores and 8th and a series of one-story buildings on the east side of Dolores between 5^th & 6^th. In both of these areas, because the surrounding context is primarily two-story buildings, second-story additions could blend well with and complement the streetscape. All newly created second-floor space would be occupied by residential uses only.

Increasing the 30’ height limit to allow 3-story buildings are not under consideration. However, it should be recognized there are examples of existing 3-story buildings downtown that blend well with the streetscape. These include the following buildings:

• Southeast corner of Ocean and Monte Verde;
• Monte Verde 2 southwest of Ocean (Mote Verde Inn);
• Northeast corner of Monte Verde & 6th (Pine Inn);
• Ocean 2 northwest of Lincoln (Pine Inn);
• Monte Verde 2 northeast of 7th (L’Auberge);
• Northeast corner of 7th & San Carlos (Nielsen Market);
• Northeast corner of 8th & San Carlos (Villa San Carlos);
• East side of Mission between Ocean & 7th (Carmel Plaza);
• San Carlos and Camino del Monte (Hofsas House), and
• Junipero between 5th and 6th (Carmel Bay View Inn).

In the 5^th cycle Housing Element, Program 3-2.1.c: Incentives for Mixed-Use Affordable Housing included exploring the potential of allowing a third story when devoted to affordable housing as a development incentive. While no project applicants requested a third story for affordable housing, the previously approved Del Dono project included affordable housing and a third-floor mezzanine.

Encouraging third-floor (not third-story) mezzanines within two-story buildings could be a creative option to accommodate housing while maintaining the appearance of a two-story building from the exterior. Note that “story” references the exterior of a building, and “floor” references the interior.

Recommendation: Modify Program 3.1.A: Mixed Use Affordable Housing to allow for a third-floor (not a story) mezzanine within the current height limits to encourage the development of affordable housing. Note the current height limits are as follows. In the CC and SC districts, structures are limited to a maximum of 30 feet. In the RC and R-4 districts, structures are limited to a maximum of 26 feet. Building sites that face, abut, or adjoin any property in the R-1 district are limited to a height of 24 feet.

5. Policy Question: Should we consider using Senate Bill (SB) 10 for the Regional Housing Needs Allocation (RHNA) sites zoned R-1, or should we remove them from the site's inventory?

Concern: We committed to meeting our Regional Housing Needs Allocation (RHNA) without having to rezone property, but there are R-1 properties included in the site’s inventory.

Response: The following sites are identified as potential housing sites and are currently zoned R-1:

• Red Cross (5 units),
• American Legion (5 units),
• First Church of Christ Scientist (9 units),
• Carmel Presbyterian Church (36 units), and
• Pine Inn Parking Lot (5 units).

While zoned R-1, all sites contain non-residential uses. These sites could be potential housing sites and retain their R-1 zoning if Senate Bill (SB) 10 is utilized. SB10 is a voluntary process that allows cities to override the underlying zoning of a parcel and permit up to 10 housing units.

Recommendation: Remove the Pine Inn Parking Lot and Carmel Presbyterian Church from the site's inventory. The City has learned that the property owner of the Pine Inn Parking Lot is exploring an alternative design concept. Carmel Presbyterian Church has a potential capacity that exceeds 10 units and would be underutilized under SB10. If the City Council prefers not to use SB10 on the remaining three sites, staff recommends they be removed and replaced with alternative sites.

6. Policy Question: Should we modify Program 1.3.C: Accessory Dwelling Units to remove the creation of standardized, pre-approved Accessory Dwelling Unit plans?

Concern: Accessory Dwelling Units are not affordable and are not being rented out, so why incentivize them?

Response: State law streamlined the permitting process for ADUs by eliminating a local jurisdiction's ability to require a use permit or conduct a discretionary design review for an ADU. Through the adoption of a local ADU ordinance, the City can regulate the design of an ADU through objective design standards. Carmel’s local ordinance with objective ADU standards is currently being drafted.

The creation of standardized, pre-approved ADU plans provides “shelf-ready” construction drawings to interested property owners, further streamlining the permit process and reducing the cost. This type of incentive can be beneficial to homeowners seeking to establish an ADU.

Increasing the supply of ADUs is an important piece of the overall housing plan. It provides a housing opportunity for various household types (aging parents, caregivers, college students, disabled family members, single parents, empty nesters, etc.). ADUs can also provide an income stream to property owners, lessening the financial burden of homeownership. Whether or not an ADU is rented at market-rate or “free” today, tomorrow, or sometime over the course of 50 years, every new ADU adds a potential housing opportunity and diversifies the housing stock.

Recommendation: Retain Program 1.3.C to explore the creation of standardized, pre-approved Accessory Dwelling Unit plans.

7. Policy Question: Should we keep properties that contain parking lots on the site's inventory, or should we remove them?

Concern: Elimination of parking to provide more housing would exacerbate existing parking issues.

Response: The site's inventory can be found in Appendix C of the Draft Housing Element. A list of sites is provided in Table C-3. Some of the sites include existing parking lots that provide private parking, such as Bruno’s Market, or public parking, such as the Sunset Center. While parking is unquestionably a necessity, parking lots are often underutilized pieces of land that hold a higher development potential than just parking spaces. Identifying these sites as opportunities for future housing does not mean that parking will be replaced with housing. Rather, the City can require that existing parking be incorporated into the design of a new housing project, which could include underground parking or at-grade parking with housing above. If spatially and financially feasible, the supply of parking could even increase through more efficient site design. It is worth noting numerous underground parking garages throughout the Village supply much-needed parking without the undesirable appearance of an asphalt parking lot.

Recommendation: Retain sites with parking lots on the site's inventory on the condition that existing parking spaces are incorporated into the design of any future housing project.

Next Steps and Timeline

The public comment period on the Public Review Draft of the Housing Element closed at 5:00 PM on Thursday, July 6th. Between July 7th and July 20th, City staff and EMC Planning Group will be reviewing public comments in coordination with the Housing Ad Hoc Committee, and preparing a catalog of written responses for submittal to HCD with the draft Housing Element. Based on public comments received and the feedback and policy direction received this evening, staff will revise the draft Housing Element.

On August 1, 2023, staff will present the revised document to the City Council and request authorization to submit the draft Housing Element to HCD for the State’s 90-day review period.

After receiving comments from HCD, the draft Housing Element will be revised and resubmitted for certification. Any substantive changes in policy would be brought back to the City Council for consideration prior to resubmitting for certification. Once staff receives notification from HCD that the Housing Element is in substantial compliance with state law, staff will present the final document to the City Council for adoption.

Consultant fees for the 2023-2031 Housing Element (and Safety Element) update project are $239,145.00. The cost will be fully paid with grant funding from SB2, LEAP, and REAP. In 2019 and 2020, the City received three grant awards totaling $290,000 to assist with the cost of updating the Housing Element: SB2 ($160,000), LEAP ($65,000), and REAP ($65,000).

On February 7, 2023, the City Council entered into a Professional Services Agreement with EMC Planning Group for the 6th cycle Housing Element update and General Plan Safety Element update.