6^th Cycle Draft Housing Element (2023-2031), Response to HCD Comment Letter

Receive the report and provide direction.

 EXECUTIVE SUMMARY:

This report focuses on policy-level changes to the draft 6^th cycle Housing Element based on comments received from the State of California Department of Housing and Community Development (HCD) on November 1, 2023. This review aims to obtain feedback from the City Council and the public on the proposed changes before resubmitting the Housing Element to HCD on January 24th. Revisions to the 6^th cycle Housing Element are ongoing, and a revised draft will be posted online at www.HOMECarmelByTheSea.com on January 16^th. 

Background:

The City of Carmel-by-the-Sea last updated the General Plan Housing Element in 2015 for the 5th cycle planning period of 2015-2023. Under state law, the Housing Element must be updated every eight (8) years in a manner consistent with the Regional Housing Needs Allocation (RHNA). The 6th cycle planning period is 2023-2031, and the City’s RHNA is 349 housing units. The Housing Element includes policies, programs, incentives, and objectives to achieve the City’s housing goals, including planning for the creation of 349 new housing units, and must be adopted by the local jurisdiction and certified by the California Department of Housing and Community Development (HCD) by December 15, 2023. A 120-day grace period follows, ending on April 15, 2024.

In 2022, Mayor Potter appointed a Housing Ad-Hoc Committee consisting of Mayor Pro Tem Bobby Richards and Councilmember Karen Ferlito.

On February 7, 2023, the City entered into a Professional Services Agreement with EMC Planning Group to assist the City with preparing the 6^th cycle Housing Element Update.

On June 6, 2023, the Public Review Draft of the 6^th cycle Housing Element was released for a 30-day public comment period.

On August 2, 2023, the 6^th cycle Housing Element was submitted to the State Department of Housing and Community Development (HCD) for a 90-day review period (Attachment 1).

On November 1, 2023, the City received HCD’s comment letter on the draft Housing Element (Attachment 2).

Staff is working with our partners at EMC Planning Group to revise the 6^th cycle Housing Element in response to HCD’s comments. The revised Housing Element is scheduled to be resubmitted to the State on January 24, 2024. State law requires that the revised Housing element be made available for public review at least seven (7) days prior to resubmitting. The revised 6^th cycle Housing Element will be posted online at www.HOMEcarmelbythesea.com on January 16, 2024.

The state has 60 days to review the revised 6^th cycle Housing Element and provide a letter of substantial compliance with state law or additional comments. Assuming the former, the City Council would be asked to adopt the updated Housing Element at their regular meeting on April 2, 2024. The document would then be submitted back to the State in advance of the April 15^th deadline for certification. Once certified, the 6^th cycle Housing Element will be submitted to the California Coastal Commission for final approval as part of our Local Coastal Plan.

Summary of Revisions:

The HCD comment letter focuses on two categories of the draft 6^th cycle Housing Element, “Housing Needs, Resources, and Constraints” and “Housing Programs.” Many of the comments focus on providing additional analysis to address various topics. This analysis informs the 6th-cycle housing programs.

Affirmatively Furthering Fair Housing (AFFH). New state legislation for the 6^th cycle Housing Element update requires a more robust analysis on affirmatively furthering fair housing. This includes explaining how the City proactively complies with fair housing and responds to fair housing complaints. The Housing Element must also analyze historic patterns of integration and segregation, disparities in access to transportation, and substandard housing. Based on these analyses, housing programs are developed to address any deficiencies. Additional analyses are being incorporated into the 6^th cycle Housing Element.

Regional Housing Needs Allocation (RHNA). RHNA is an assignment of housing units to individual cities and counties based on the projected housing need within a region. Carmel is part of the Association of Monterey Bay Governments (AMBAG) region, which includes Monterey and Santa Cruz counties and the cities within each county. Carmel’s share of the regional housing need is 349 new housing units. Units include single-family, multi-family, and accessory dwelling units, among other potential housing types. A portion of the 349 housing units (231 units) must be set aside as affordable to lower and moderate-income households.

To increase the local housing supply over the next eight years, the 6^th cycle Housing Element proposes to amend the zoning code to require a minimum density of 33 dwelling units per acre for all new construction projects in the CC, SC, RC, and R-4 zoning districts. The Carmel Municipal Code already requires that residential uses occupy all new second-floor construction, and that will continue to be implemented.

Current Progress in Meeting the RHNA – Pipeline Projects. Additional information has been included in the 6^th cycle housing element regarding projects in review, approved, or under construction between July 1^st and December 31st, 2023. Seventeen (17) new housing units have been approved (Ulrika Plaza, Scandia Lopez, & CRI on Carpenter), and an additional ten (10) new housing units are currently under review (JB Pastor & CRI on Carpenter). These 27 units reduce the city’s remaining RHNA commitment from 349 to 322 units.

Additionally, between July 1^st and December 31st, 2023, four ADUs were issued certificates of occupancy, 13 ADUs remain under construction, and building permits were issued for five new ADUs. These additional 22 housing units further reduce the city’s remaining RHNA commitment to 300.

The development community continues to show a strong interest in the construction of ADUs. The Building Safety Division is actively reviewing four building permit applications for new ADUs, which are expected to be completed during the Housing Element planning period (2023-2031). The city is six months into the planning period and has met over half of the projected ADU development for the next eight years.

On an annual basis, staff will report to the State the number of new housing units in review, approved, and/or under construction. This report is known as the Annual Progress Report and is due on April 1^st each year.

Housing Priority Overlay Zone. The proposed Housing Priority Overlay Zone has been eliminated from the housing programs. Overlay Zones were challenged in a recent court case (Martinez vs City of Clovis), and HCD does not appear to support using Overlay Zones. Instead, the city will implement the provisions previously proposed under the Overlay Zone through other regulatory means (e.g., the adoption of policies, amendments to the Carmel Municipal Code, etc.), including:

• Prioritizing the distribution of the city’s water resources to affordable housing.
• Evaluating further parking reductions and/or waivers for affordable housing.
• Evaluating permit fee reductions and/or waivers for affordable housing.
• Establishing a floor area ratio incentive program to encourage affordable housing.
• Establishing a minimum density of 33 dwelling units per acre in the CC, SC, RC, and R-4 Districts.

Next steps and Timeline:

The 6^th cycle draft Housing Element will be posted on the city’s website on January 16^th and resubmitted to HCD for a 60-day review period on January 24, 2024. Staff will remain in close contact with HCD staff during the review process to answer any questions or provide clarification where needed.

On or before March 25, 2024, the city will receive a letter from HCD that either,

1) Finds the draft Housing Element substantially complies with state law, or

2) Requires further revisions and outlines what those revisions include.

If HCD finds the document in substantial compliance, the City Council can adopt the Housing Element and submit it back to HCD for certification. If revisions are required, City staff will review the comments, discuss any substantive changes with the City Council and the public, and resubmit the document for another 60-day review by HCD. This process continues until HCD finds the document to be in substantial compliance with state law.

The environmental review for the 6^th cycle Housing Element update is underway. A draft Initial Study has been completed, and a Mitigated Negative Declaration has been prepared for the project. The environmental document will be posted for a 20-day public review period. The environmental document and 6^th cycle Housing Element will be presented to the City Council concurrently for adoption.

Following the City Council's adoption of the 6^th cycle Housing Element and HCD certification, staff will submit the document to the California Coastal Commission (CCC) as a Local Coastal Plan (LCP) Amendment. HCD does not require the City to obtain approval from the CCC before adopting or certifying the updated Housing Element.

Consultant fees for the project are $371,931. The cost will be paid with grant funding from SB2, LEAP, and REAP, as well as contract services from the Community Planning & Building Department fiscal year 2023/2024 budget. 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 adopted Resolution 2023-024, entering into a Professional Services Agreement with EMC Planning Group for the 6th cycle Housing Element update and General Plan Safety Element update at a cost of $239,145.

On July 11, 2023, the City Council adopted Resolution 2023-074, amending the Agreement to include additional work under the California Environmental Quality Act (CEQA) at an additional cost of $40,455.

On January 9, 2024, the City Council was presented with Resolution 2024-011, amending the Agreement to include additional work in response to the comment letter from the State Department of Housing and Community Development (HCD) for an additional cost of $92,331.