Accessory Dwelling Units: Maximum Unit Size and Residential Impact Fee City Council March 12, 2018

City Council: Background On December 11, 2017, City Council approved a series of proposed amendments to the Accessory Dwelling Unit Ordinance Council directed staff to include in the ordinance a maximum unit size for Newly Constructed Accessory Dwelling Units of 1,200 square feet for properties at a to- be-determined minimum lot size threshold

City Council: Background City Council discussed, but did not approve the staff recommendation to reduce the Residential Impact Fee for new ADUs Concerns regarding the potential for ADUs to be market rate units and not fulfill the goal of providing more affordable housing in the City Decided to provide for a reduction of the Residential Impact Fee for ADUs only if the applicant enters into an affordability covenant Directed staff to examine lessening the term of an affordability covenant for ADUs

City Council: Background On February 5, 2018, the City Council received staff recommendations for maximum unit size and affordability covenants for ADUs City Council voted to continue the discussion to a later meeting date Directed staff to elaborate on the legalities of the Residential Impact Fee as applied to ADUs

Newly Constructed ADUs: Maximum Unit Size Original Recommendation: 800 square feet or 50% of existing living space, whichever is less Revised Recommendation: Properties between 7,200 square feet and less than 10,000 square feet 800 square feet or 50% of the existing living space, whichever is less Properties greater than or equal to 10,000 SF 1,200 square feet or 50% of the existing living space, whichever is less

Residential Impact Fee Per State law, municipalities are not prohibited from charging development impact fees and land use application fees Limitations on fees for utility connection or capacity fees, including water and sewer service

Residential Impact Fee Provide reduction of the Residential Impact Fee for affordable ADUs If new unit is restricted affordable $957.30 Adjusted per Consumer Price Index Same fee charged for other covenanted affordable units Term: 7 years

Development Impact Fees Affordability Agreement Options Affordability Covenant Require a homeowner to set rent for ADU at level affordable to households with an income up to 120% of the Area Median Income Term: 7 years After 7 years, the covenant would expire and there would be no limitation as to whom the ADU could be rented to Can make selling and/or refinancing a home more difficult Homeowner may not have the knowledge, resources, and time to verify the income levels of potential tenants

Development Impact Fees Affordability Agreement Options Landlord Agreement Two Options Commit the ADU to be rented out exclusively to the City’s rental assistance clients (includes Section 8 eligible renters) Commit the ADU to be rented out to “family members” (as defined by the City’s Tenant Protection Ordinance) at no more than the 50% AMI Inclusionary Housing Rent rate Term: 7 years After 7 years, the agreement would expire and there would be no limitation as to whom the ADU could be rented to

Development Impact Fees Affordability Agreement Options Landlord Agreement No legal encumbrances on the property that could limit a homeowners future financial options Homeowner would not have to verify the income level of each prospective renter, as the City would already have a list of pre-qualified tenants For both Landlord Agreement options, if homeowner decides to end the agreement before the set term of 7 years, they will be responsible for paying the full Residential Impact Fee to the City Same as ending covenant before 7 years.

Development Impact Fees Affordability Agreement Options Affordability Option Term (Years) Income Limit Rent Limit Affordability Covenant 7 Up to 120% of AMI Up to 30% of 120% of AMI (2017: $1,994) Landlord Agreement 1: Pre-Qualified Rental Assistance Clients Per City’s Pre-Qualified Rental Assistance List Landlord Agreement 2: Family Members -- Up to 50% AMI Inclusionary Unit Rent Limit (Studio: $566) (One-Bedroom: $648) 2017 Los Angeles County AMI: $64,800 per CA State Department of Housing and Community Development (4-person household)

Inclusionary Housing Regulations Residential Impact Fee ordinance (PMC Chapter 4.17), residences rented or sold to persons of low or moderate income pursuant to inclusionary housing regulations pay reduced fee Recommend amendment to inclusionary housing regulations to implement landlord agreement guidelines and provide for reduced fee

Certification & Compliance Monitoring Housing Dept. approves tenant household income and rent charged by landlord Landlord submit annual report and certification to Housing Dept. The report contains household size, income, and rent for each affordable unit. Housing Dept. reviews the annual report Housing Dept. advises landlord of any non- compliance issues and requires corrective measures Ongoing, non-corrected issues may be referred to City Attorney for enforcement

Recommendation Acknowledge the proposed Zoning Code Amendments are exempt from environmental review Acknowledge that the proposed changes to covenants for affordable ADUs and the new landlord agreement is not a “project” and therefore not subject to environmental review Approve the proposed Zoning Code Amendments to regulate maximum allowable size of Newly Constructed ADUs Approve the proposed changes to the Inclusionary Housing Regulations Direct the City Attorney to return within 30 days: An ordinance amending the Pasadena Municipal Code Amended Inclusionary Housing Regulations

Accessory Dwelling Units: Maximum Unit Size and Residential Impact Fee City Council March 12, 2018

Moderate-Income Household (120% of AMI) Income Limits Estimated Household Size Adjusted Median Income per Household Size 120% of AMI (Moderate-Income) 1 $45,350 $54,450 2 $51,850 $62,200 3 $58,300 $70,000 4 $64,800 $77,750 5 $83,950 Source: CA State Department of Housing and Community Development

Inclusionary Unit Rent Limits 50% AMI Bedroom Size Estimated Household Size Adjusted Median Income per Household Size Rent Limits (50% AMI)* Studio 1 $45,350 $566 1-bedroom 2 $51,850 $648 2-bedroom 3 $58,300 $728 3-bedroom 4 $64,800 $810 4-bedroom 5 $70,000 $875 *Based on 2017 LA County Area Median Income (4-person household: $64,800) adjusted for household size appropriate to the unit per CA State Department of Housing and Community Development Example: ($45,350/2)= $22,675/12 =$1,890 x 0.30= $566

Section 8 Rental Assistance Program Payment Standards Bedroom Size Northwest/East/Linda Vista/Southwest Fair Market Rent* Studio $1,174 $1,067 1-bedroom $1,412 $1,284 2-bedroom $1,663 3-bedroom $2,231 4-bedroom $2,467 5-bedroom $2,837 *Effective October 1, 2017

Definition of “Family Member” “Family member” means the Landlord’s spouse, grandparents, grandchildren, brother, sister, father-in-law, mother-in-law, daughter-in-law, son- in-law, children, or parents (City of Pasadena Tenant Protection Ordinance)