Chapter 17.40


17.40.010    Purpose.

17.40.020    Affordable housing (-AH) overlay zone.

17.40.030    Vacation rental use (-VRU) overlay zone.

17.40.040    Village residential (-VR) overlay zone.

17.40.010 Purpose.

This chapter contains requirements for overlay zones that primarily apply to residential uses and residential areas. Overlay zones establish additional standards and regulations to specific areas, in addition to the requirements of the underlying base zoning district. (Ord. 1017 § 2 (Exh. A) (part), 2018)

17.40.020 Affordable housing (-AH) overlay zone.

A. Purpose. The purpose of the affordable housing (-AH) overlay zone is to facilitate the provision of affordable housing units through the retention and rehabilitation of existing affordable units, or the construction of new affordable units. The -AH overlay zone is intended to:

1. Implement the goals and policies of the general plan housing element and provide the opportunity and means for Capitola to meet its regional fair share allotment of affordable units.

2. Encourage the development of affordable units by assisting both the public and private sector in making the provision of these units economically viable.

3. Provide assurances to the city that these units will maintain a high degree of quality and will remain affordable to the target population over a reasonable duration of time.

4. Encourage the provision of affordable housing through the combination of the -AH overlay within the multifamily residential zone where the affordable housing projects are determined to be feasible and are consistent with the general plan.

5. Provide a means of directing and simplifying the process for creating and maintaining affordable housing.

6. Provide incentives to developers, whether in new or rehabilitated housing, to maintain rental units for the long term (e.g., not less than fifty-five years) and affordable ownership units in perpetuity.

B. Applicability. The -AH overlay zone may be applied to parcels located in a multifamily residential or community commercial (C-C) zoning district.

C. Definitions.

1. “Affordable housing” means housing capable of being purchased or rented by a household with “very low,” “low,” or “moderate” income levels at an “affordable housing cost” or “affordable rent,” as those terms are defined by the state of California.

2. “Affordable housing overlay district” means a zoning district that applies in addition to existing zoning designation where the city encourages the provision of affordable housing units as described in this chapter.

3. The “very low,” “low,” and “moderate” income levels are defined by the state of California in Sections 50105, 50079.5, and 50093, respectively, of the California Health and Safety Code, and in Subchapter 2 of Chapter 6.5 of Division 1 of Title 25 of the California Code of Regulations, commencing with Section 6900. These income levels are:

a. Very Low Income. Up to and including fifty percent of the Santa Cruz County median income, adjusted for family size, as defined by the state law;

b. Lower Income. Fifty-one percent to eighty percent of Santa Cruz County median income, adjusted for family size, as defined by the state law;

c. Moderate Income. Eighty-one percent to one hundred twenty percent of Santa Cruz County median income, adjusted for family size, as defined by state law.

4. “Affordable housing cost” and “affordable rent” are defined in Sections 50052.5 and 50053, respectively, of the California Health and Safety Code, and in Subchapter 2 of Chapter 6.5 of Division 1 of Title 25 of the California Code of Regulations, commencing with Section 6900.

D. Relationship with State Density Bonus Law and Other State Laws.

1. All of the state laws and regulations referenced above, or their successors in defined terms when amended, shall be incorporated herein as though fully set forth. In the event of any inconsistency or discrepancy between the income and affordability levels set forth in this chapter and the levels set in state laws and regulations, the state provisions shall control.

2. The -AH overlay zone provides a density increase for affordable housing development that in most cases exceeds density bonuses permitted by state law (Government Code Section 65915).

3. A development may utilize the -AH overlay zone as an alternative to the use of state density bonus but may not utilize both the overlay and state density bonuses.

E. Permits and Approvals Required.

1. Affordable housing developments proposed under this chapter require the execution of a development agreement by the city and the developer. The development agreement shall be prepared in accordance with the provisions of California Government Code Section 65864 et seq.

2. Affordable housing developments proposed under this chapter require approval of a design permit. All requirements in Chapter 17.120 (Design Permits) apply, except that the planning commission recommends design permit approval or denial to the city council. The city council may take action on the design permit application concurrently with or subsequent to action on the development agreement.

F. Permitted Residential Density.

1.     Affordable housing developments with up to twenty units per acre are permitted in the -AH overlay zone. The twenty units per acre limit is based on a calculation that includes all existing and new units on the property.

2. Density permitted in the -AH overlay zone may not exceed what can be accommodated by the site while meeting applicable parking, unit size, and other development standards.

3. Affordable housing development in the coastal zone may require a coastal permit in accordance with Chapter 17.44 (Coastal Overlay Zone).

G. Income Restrictions.

1. A minimum of fifty percent of the units in an affordable housing development shall be income restricted affordable housing. All affordable units may be in a single category or part of a mixture of affordable unit types which include:

a. Moderate income households;

b. Low income households;

c. Very low income households; or

d. Extremely low income households.

2. At minimum fifty percent of income-restricted affordable units (twenty-five percent of the total project units) shall be affordable to low, very low, and extremely low income households. A greater level of affordability will not allow a greater level of density.

H. Development Incentives.

1. Purpose.

a. In order to reduce costs associated with the development and construction of affordable housing, affordable housing developments within the -AH overlay zone shall be eligible for specified development incentives. These incentives allow for the relaxation of development standards normally applied to housing in Capitola and are established in order to facilitate and promote the development of affordable housing in the city.

b. Incentives shall be targeted to improve the project design or to yield the greatest number of affordable units and required level of affordability, so as to permit the city to meet its regional fair share allotment of affordable housing and the goals of the housing element of the general plan.

2. Relaxed Development Standards. The city shall allow the following relaxed development standards for projects that comply with the affordability required in subsection G of this section (Income Restrictions):

a. Minimum Building Site Area and Lot Area per Unit. There shall be no minimum building site area requirement for individual parcels or dwelling sites within the -AH overlay zone. The building site area shall be designated on a site plan as approved by the city through the design permit review process.

b. Density Averaging. Project density within the -AH overlay zone may be calculated by averaging the density on a project-wide basis so as to permit higher density levels in certain project portions in exchange for advantageous project design features as determined by the city through the design permit review process.

c. Setbacks.

i. The minimum setbacks from property lines shall be determined by the city through the design permit process.

ii. Minimum setbacks from property lines adjacent to or across from a single-family residential zone shall be same as underlying zoning district.

d. Building Coverage. The city shall determine the maximum building coverage for the proposed project through the design permit process.

3. Additional Development Incentives.

a. As a further inducement to the development of affordable housing beyond the relaxed development standards described in subsection (H)(2) of this section (Relaxed Development Standards), the city may choose to extend one or more additional development incentives depending on the quality, size, nature, and scope of the project being proposed.

b. Additional development incentives may be in the form of waivers or modifications of other standards which would otherwise inhibit density and achievement of affordable housing goals for the development site, including, but not limited to, the placement of public works improvements.

I. Design Standards.

1. Purpose and Applicability.

a. The following design standards are intended to ensure high quality development within the -AH overlay zone that enhances the visual qualities of Capitola and respects adjacent homes and neighborhoods.

b. Design standards shall apply to all projects receiving development incentives described in subsection H of this section (Development Incentives) or residential densities greater than allowed by the applicable base zone.

2. Neighborhood Compatibility.

a. Affordable housing developments shall be designed and developed in a manner compatible with and complementary to existing and potential development in the immediate vicinity of the project site.

b. Site planning on the perimeter shall provide for protection of the property from adverse surrounding influences and shall protect surrounding areas from potentially adverse influences from the property.

c. To the greatest extent possible, the design of the development shall promote privacy for residents and neighbors, security, and use of passive solar heating and cooling through proper placement of walls, windows, and landscaping.

d. Building design and materials shall blend with the neighborhood or existing structures on the site.

3. Building Height. Maximum building height shall be the same as in the underlying base zoning district.

4. Common Open Space.

a. Common open space shall comprise the greater of:

i. Ten percent of the total area of the site; or

ii. Seventy-five square feet for each dwelling unit.

b. Areas occupied by buildings, streets, driveways, parking spaces, utility units, mailboxes, and trash enclosures may not be counted in satisfying the open space requirement.

c. The following areas may be counted in satisfying the open space requirement:

i. Landscaping and areas for passive and active recreation/open space with a minimum depth and width of five feet.

ii. Land occupied by recreational buildings and structures.

5. Streets.

a. All public streets within or abutting the proposed development shall be improved to city specifications for the particular classification of street.

b. All private streets shall meet fire code and access standards.

6. Accessory Uses and Structures. Accessory uses and structures shall be permitted as allowed by Chapter 17.52 (Accessory Structures and Uses) and as required through the design permit process.

7. Signs. Signs shall be permitted as allowed by Chapter 17.80 (Signs) and as required through the design review process.

J. Assurance of Affordability.

1. Affordable housing units developed under this section shall remain available to persons and families of very low, low, and moderate income, at an affordable housing cost or affordable rental cost, at those income and affordability levels as defined in subsection C of this section (Definitions), for fifty-five years or the natural life of the unit, whichever is greater, unless a longer period is required by a construction or mortgage financing program, mortgage insurance program, state law, or housing grant, loan or subsidy program.

2. The required period of affordability shall run concurrently with any period of affordability required by any other agency; provided, however, that the affordability period shall not be less than fifty-five years or the natural life of the unit, whichever is greater.

3. The project developer shall be required to enter into an appropriate agreement with the city to ensure affordability is maintained for the required period.

K. Pre-Application Consultation.

1. Prior to submitting an application for an affordable housing development within the -AH overlay zone, the applicant or prospective developer should request preliminary consultation meetings with the community development department and other city staff as appropriate, to obtain information and guidance before incurring substantial expense in the preparation of plans, surveys and other data.

2. Preliminary consultations with city staff should address potential local, state, and federal affordable housing funding availability, and program requirements in guaranteeing project consistency with the objectives and requirements of the -AH overlay zone.

L. Additional Application Requirements. An application for an affordable housing development within the -AH overlay zone shall be filed and reviewed in compliance with Chapter 17.112 (Permit Application and Review) and shall also include the following materials and information:

1. Breakdown of affordable and market rate units including unit number, unit size, affordable designation of each unit (very low, low, or moderate), and rental rate or sale price.

2. The proposed means for assuring the continuing existence, maintenance and operation of the project as an affordable housing project.

3. Such other information as may be required by the community development department to allow for a complete analysis and appraisal of the proposed project.

M. Findings. To approve or recommend approval of an affordable housing development, the review authority shall make all of the following findings, in addition to the findings required by Chapter 17.120 (Design Permits):

1. The incentives granted for density and deviation from development and design standards, are commensurate with the level of affordability. Specifically, the greater the extent of concessions and incentives, the greater the level of affordability, quality, size, nature, and scope of the project being proposed.

2. The design of the proposed project, even with the concessions for density and deviation from development and design standards, is appropriate for the scale and style of the site and surrounding neighborhood. Specifically, the development will provide an attractive visual transition and will not significantly impact the integrity of the surrounding neighborhoods.

3.     The developer has agreed to enter into an agreement to maintain the affordability of the project specific to the requirements of the city and any funding sources with greater or longer affordability requirements.

4. If located within the coastal zone, the project is found to be in conformity with the local coastal program, including, but not limited to, sensitive habitat, public viewshed, public recreational access and open space protections. (Ord. 1017 § 2 (Exh. A) (part), 2018)

17.40.030 Vacation rental use (-VRU) overlay zone.

A. Purpose. The -VRU overlay zone identifies locations within residential areas where the short-term rental of dwelling units is permitted.

B. Applicability. Locations where the -VRU overlay zone applies is shown on the zoning map.

C. Land Use Regulations. Permitted uses in the -VRU overlay zone are the same as in the base zoning district, except that vacation rental uses are permitted with an administrative permit.

D. Required Permit. Each vacation rental unit is required to obtain a vacation rental permit, as an administrative permit, in addition to registering each unit with the city as a business. This includes obtaining a business license, renewable annually, and transient occupancy tax registration.

E. Development and Operations Standards.

1. Vacation rentals in Capitola are prohibited outside of the -VRU overlay zone.

2. Transient occupation registration is required for each vacation rental unit. A business license and transient occupancy tax registration must be obtained from the city. The business license shall be renewed annually.

3. Permit holders must submit monthly to the city a completed transient occupancy tax report and payment of all tax owing.

4. One parking space is required per vacation rental unit. Parking may be on site or within the Beach and Village Parking Lot 1 or 2 with proof of permit, if eligible. The on-site parking space must be maintained for exclusive use by guests during their stay.

5. The property owner must designate a person who has the authority to control the property and represent the owner. This responsible person must be available at all reasonable times to receive and act on complaints about the activities of the tenants.

6. A maximum of one sign per structure, not to exceed twelve inches by twelve inches in size, is permitted to advertise the vacation rental.

7. Each unit must post the vacation rental permit in a visible location within the unit. The vacation rental permit will include a permit number, the development and operations standards of this section (this subsection E), and space to write the contact information for the responsible party.

8. If the unit is advertised on the Internet, the first line of the posting must include the vacation rental permit number for city reference.

9. No permit holder shall have a vested right to a renewed permit. If there is a history of the permit holder or tenants violating the permit’s conditions, the permit may be revoked consistent with Section 17.156.110 (Permit revocation). After a permit is revoked, the permit holder may reapply for a new permit one year after the revocation. The community development director may deny an application based on previous code enforcement issues. A decision by the community development director is appealable to the planning commission.

10. All vacation rental units shall have smoke detectors and carbon monoxide detectors.

11. Accessory dwelling units may not be used for vacation rentals. (Ord. 1017 § 2 (Exh. A) (part), 2018)

17.40.040 Village residential (-VR) overlay zone.

A. Purpose. The purpose of the -VR overlay zone is to limit certain areas within the Village to exclusive residential use, including vacation rentals.

B. Land Use Regulations.

1. Residential Uses Only. Within the -VR overlay zone, only residential land uses (including vacation rentals) are permitted. Nonresidential land uses, including but not limited to restaurants, retail, offices, and personal services, are not permitted in the -VR overlay zone.

2. Existing Hotels and Motels. Alterations and modifications to existing hotels and motels shall occur in a manner consistent with Chapter 17.92 (Nonconforming Parcels, Uses and Structures).

C. Development Standards. Development standards in the -VR overlay zone are the same as the mixed use village (MU-V) zoning district. (Ord. 1017 § 2 (Exh. A) (part), 2018)