Discussion/Direction on housing outreach to identify alternatives to the city-owned sites for the construction of affordable housing.

Receive the report and provide direction.

At the April 8, 2024, special meeting of the City Council, the Council heard from concerned residents about the potential for affordable housing to be constructed on city-owned parking lots at Sunset Center and Vista Lobos. The concerns expressed included placing large-scale apartment buildings on city sites inconsistent with the village's small-scale character and concentrating affordable housing in these locations. In response to the concerns heard, a motion was passed to place an item on the May 7^th agenda to discuss finding alternative sites for affordable housing throughout the Village that could facilitate removing the city-owned sites from the Housing Element through an amendment.

More specifically, Councilmember Dramov proposed directing staff to make a good-faith effort over the next year to conduct outreach to downtown business owners and church representatives to find out if they are interested in building affordable housing with the ultimate goal of removing the city-owned parking lot sites at Sunset Center and Vista Lobos from the Housing Element sites inventory list through an amendment to the Housing Element.

To aid in this discussion, staff is providing information on how the city-owned sites were selected and the outreach conducted to commercial property owners and churches during the development of the Housing Element in 2023 and 2024.

2023-2031 Regional Housing Needs Allocation (RHNA)

For the 2023-2031 Housing Element update, the City of Carmel is planning for 349 new housing units, of which 231 must be affordable to very low, low, and moderate-income households. The remaining 118 units are market-rate units.

The adopted Housing Element identifies three city-owned parking lots, Sunset Center North, Sunset Center South, and Vista Lobos, to accommodate 149 of the 231 affordable housing units (65% of the total need). Accessory Dwelling Units (ADUs) and hospitality employee housing would achieve the remaining affordable housing units (refer to Attachment 1).

State law sets forth the criteria for identifying potential housing sites and calculating the number of housing units that can reasonably be accommodated on a site. Small parcels typically cannot support the number of housing units necessary to make affordable housing financially feasible for developers. In other words, small sites typically do not “pencil out.”  The State defines a “small parcel” as less than 0.5 acres or 26,730 square feet. Most commercial sites in Carmel are less than 0.5 acres.

Additionally, the City’s Zoning Code limits the size of building sites in the three commercial districts (refer to Table 1 below). The RC District is the only District that allows lot sizes exceeding 0.5 acres. In the CC and SC Districts, sites could be consolidated to achieve a lot size that could accommodate affordable housing so long as the land area is broken up into two or more distinctly different developments to avoid the appearance of a single large project and to maintain the small scale and village character of the City.

Table 1. Maximum Building Site Area

For these reasons, it was difficult to identify properties in the three commercial districts that would meet the State’s requirements for affordable housing. As discussed at many of the public meetings, the State’s review of Housing Elements in this 6^th Cycle leans heavily on the “viability” of a site to produce affordable housing during the planning period (2023-2031).  Said differently, if the State does not believe that a proposed site has a realistic chance of having affordable units built, they will not certify a Housing Element that relies on that site.  It’s important to note that if the city-owned sites are not replaced with sites that meet HCD’s criteria for affordable housing, the city risks housing element decertification. Failure to make progress on the programs outlined in the housing element also puts the city at risk of decertification or other penalties.

2023-2031 Sites Inventory

Identifying potential housing sites for the 2023-2031 Housing Element update began with a feasibility study undertaken by ECONorthwest. In their report, dated January 27, 2023, they identified 16 potential housing sites (Attachment 2). City staff contacted the property owners of the sites identified, provided a copy of the report, and extended an invitation to attend the February 7^th City Council meeting, and February 28th community meeting. At least two property owners attended the February 7^th meeting. At the February 28^th meeting, no property owners expressed interest in developing housing.

The primary outreach tools utilized through the housing element update process included a dedicated project website (www.homecarmelbythesea.com), the City’s official website (www.ci.carmel.ca.us), Constant Contact listserv, Pine Cone notices, and the City Administrator’s Friday Letter. In addition to the February communication, City staff sent a direct letter through the USPS inviting 107 property owners to attend the May 24^th community meeting.

At the urging of HCD, City staff sent another letter in December 2023 to the 20 property owners whose sites were listed in the draft sites inventory table to obtain firm commitments to construct housing. Of the eight responses, three expressed interest in developing housing, and five expressed disinterest.

Early in the development of the Housing Element update,  church sites were considered as potential housing opportunity sites. The First Church of Christ Scientist parking lots on Lincoln Street have been included in the adopted Housing Element. City staff has met with church representatives several times since 2017 regarding potential housing proposals. Based on this interest, staff included the parking lots in the sites inventory. Because the parking lot sites are less than 0.5 acres, no affordable housing has been designated on these parcels. This does not preclude the church from constructing affordable units; if such units are constructed, they would be counted towards the city’s RHNA obligation.

Carmel Presbyterian Church was also considered a potential housing opportunity site early in the Housing Element update process due to the size of its parking lot. However, the church did not express interest in constructing housing. Further, the site is located in the R-1 District, which would have required. As a result, the site was removed from the Housing Element. Staff notes that rezoning more recent state legislation may allow for redevelopment of church parking lots for affordable housing without the requirement to rezone.

All Saints Episcopal Church is also located in the R-1 District. It appears the church may have an approximately 2,000-square-foot parking lot. This site was not considered for inclusion in the Housing Element.

The Carmel Mission Basilica utilizes a parking area within public right-of-way fronting Rio Road. Other areas of the site may have development potential. Potential challenges may include impacts to the historic resource and disturbing an archaeologically sensitive area. Additionally, this site is located in the R-1 District. Due to the complexity of this site, it was not included in the Housing Element. However, as stated above, the church is not precluded from developing affordable housing, and any units constructed would be counted towards the city’s affordable housing obligation.

During the public comment period of the April 2^nd City Council meeting, information regarding church sites was presented, including a statement that 8 acres of church land is “unbuilt” and could satisfy the city’s affordable housing requirements. As evidenced in the discussion above, staff explored church sites early in the Housing Element update process, and none met the State’s criteria for affordable housing (refer to Attachment 3 for staff’s data on existing church sites).

To encourage the development of affordable housing downtown and on church sites, the city might consider offering grants or other financial assistance to offset the cost of renovating existing buildings or constructing new ones.

On April 8, 2024, the City Council adopted Resolution 2024-029 approving a General Plan Amendment and adopting the 2023-2031 6^th cycle Housing Element update.