CITY COUNCIL REGULAR MEETING AGENDA PACKET

Page 2 of 8 Housing Element Sites, to align with the amendments to the IZO and make other clarifying changes. The City Council held workshops in May and August as part of the study process. May 7, 2024 Workshop At an introductory workshop on May 7, 2024, City Council reviewed and discussed the results of EPS' initial analysis, including an evaluation of potential changes to the affordable housing inclusionary rate, along with other initial findings and recommendations with respect to impact fees more generally. The latter discussion focused on seeking a balance between establishing fees at a rate that would appropriately mitigate development impacts, while being mindful of potentially negative impacts on development feasibility that could impede other City financial and policy goals. EPS evaluated various inclusionary scenarios, including some scenarios that would increase the current inclusionary rate, and others that would retain or reduce those rates. EPS also looked at the resultant equivalent in-lieu fee, if set at a level reflecting the equivalent cost to subsidize those same affordable units constructed elsewhere, and the overall feasibility of setting fees at those equivalent rates. Based on the analysis, staff’s initial recommendation was to set the inclusionary rate for all types of residential projects at 15% (i.e., decrease the current single-family/ownership rate and retain the existing multi-family rate). Additional detail and supporting analysis is provided in the May 7, 2024 Agenda Report and attachments; minutes of the May 7 workshop are included in Attachment 2 to this report. August 20, 2024 Workshop The City Council held a follow-up workshop on August 20, 2024, focused on the Inclusionary Zoning Ordinance. At this meeting, EPS provided additional analysis and refined scenarios for the inclusionary rate and in-lieu affordable housing fee; staff also provided analysis and requested City Council direction on several key policy questions for the update of the IZO. Consensus direction was provided based on a straw-poll vote by a majority of the City Council on each of the policy items, although it is noted there was not unanimity on every point. (See Attachment 2, Minutes from the May 7 and August 20, 2024 City Council Workshops). The outcomes and recommendations made by the City Council are outlined further in the analysis and discussion of the amendments to the IZO, in the Disucssion section below. With respect to the inclusionary rate and affordability levels, the City Council supported staff's recommendation to establish the rate at 15% for both rental and ownership projects, with a moderate-income target affordability for ownership units, and lower-income affordability for rental units. Additional detail and supporting analysis is provided in the August 20, 2024 Agenda Report and attachments. PLANNING COMMISSION ACTION The Planning Commission held a public hearing on September 11, 2024, to review and provide a recommendation to City Council for adoption of the updated IZO and related amendments to PMC 17.40, 18.38, and the 2023 Objective Design Standards for Housing Element Sites. By a 4-1 vote (Mohan voting “no”) the Planning Commission recommended the City Council approve the amendments as recommended by staff. As described below, the Planning Commission suggested more information be provided to City Council to support recommendations concerning minimum unit sizes. DISCUSSION Page 88 of 658