Chapter 17.32


17.32.010    Purpose

17.32.020    Applicability

17.32.030    Exemptions

17.32.040    Standards for Inclusionary Units

17.32.050    Compliance Procedures

17.32.060    Alternatives

17.32.070    Eligibility for Occupying Inclusionary Units

17.32.080    Owner-Occupied Units

17.32.090    Rental Units

17.32.100    Adjustments, Waivers

17.32.110    Enforcement

17.32.010 Purpose

The purpose of this chapter is to:

A.    Encourage the development and availability of housing affordable to a broad range of households with varying income levels within City as mandated by Government Code Section 65580 et seq.;

B.    Offset the demand for affordable housing created by new development, and mitigate environmental and other impacts that accompany new development by protecting the economic diversity of the City’s housing stock, reducing traffic, transit and related air quality impacts, promoting jobs/housing balance, and reducing the demands placed on transportation infrastructure in the region;

C.    Implement the policies of the Housing Element of the General Plan.

17.32.020 Applicability

A.    Inclusionary requirement. Each residential development, including a condominium conversion, shall be designed and constructed to provide at least 20 percent of the total units as inclusionary units restricted for occupancy by moderate-, low- or very low-income households. The number of inclusionary units required for a particular project will be determined only once, at the time of Tentative Map or Parcel Map approval, or for developments not processing a map at the time of Use Permit approval, or prior to issuance of a Building Permit. If a change in the subdivision design changes the total number of units, the number of inclusionary units required will be recalculated to coincide with the final approved project.

1.    Calculation. For purposes of calculating the number of affordable units required by this section, any additional units authorized as a density bonus in compliance with Chapter 17.33 (Affordable Housing Incentives) will not be counted in determining the required number of inclusionary units. In determining the number of whole inclusionary units required, any decimal fraction less than 0.5 shall be rounded down to the nearest whole number, and any decimal fraction of 0.5 or more shall be rounded up to the nearest whole number.

2.    Limitations on occupancy. The first one-third of the required inclusionary units shall be restricted to occupancy by low-income households. The second third of the inclusionary units shall be restricted to occupancy by very low-income households. To encourage additional development of low- and very low-income housing, the Council may authorize the use of the following equivalents:

a.    Each very low-income unit is equivalent to two units affordable to moderate-income households; and

b.    Each low-income unit is equivalent to 1.5 units affordable to moderate-income households.

B.    Minimum requirements. The requirements of this chapter are minimum and maximum requirements, although nothing in this chapter limits the ability of a person to waive their rights or voluntarily undertake greater obligations than those imposed by this chapter.

17.32.030 Exemptions

The requirements of this chapter do not apply to:

A.    The reconstruction of a structure that has been destroyed by fire, flood, earthquake or other act of nature; provided, that reconstruction does not increase the number of residential units; or

B.    A development that already has more units that qualify as affordable to moderate-, low- and very low-income households than this chapter requires; or

C.    Housing constructed by a government agency; or

D.    A second unit.

17.32.040 Standards for Inclusionary Units

Each inclusionary unit built in compliance with this chapter shall comply with the following standards:

A.    Location of inclusionary units. Except as otherwise provided in this chapter, inclusionary units shall be dispersed throughout a residential development.

B.    Design. Inclusionary units shall be comparable in infrastructure (including sewer, water and other utilities), construction quality and exterior design to the market-rate units. Inclusionary units may be smaller in aggregate size and have different interior finishes and features than market-rate units so long as the interior features are durable, of good quality and consistent with contemporary standards for new housing. The number of bedrooms shall be the same as those in the market-rate units, except that if the market-rate units provide more than four bedrooms, the inclusionary units need not provide more than four bedrooms.

C.    Timing of construction. All required inclusionary units shall be constructed and occupied concurrently with or prior to the construction and occupancy of the associated market-rate units or development. In a phased development, the inclusionary units may be constructed and occupied in proportion to the number of units in each phase of the residential development; provided, that the last inclusionary unit in the project shall be constructed before the last market-rate unit.

D.    Duration of affordability requirement. Each inclusionary unit produced in compliance with this chapter shall be legally restricted to occupancy by households of the income levels for which the unit was designated, for a minimum of 40 years from the date of first occupancy for rental units, and for a minimum of 40 years from the date of each sale of any affordable unit for owner occupied units. (Additional affordability requirements may apply in compliance with state redevelopment law (Health and Safety Code Section 33413(c).)

17.32.050 Compliance Procedures

A.    General. Approval of an inclusionary housing plan and implementation of a City approved inclusionary housing agreement is a condition of any Tentative Map, Parcel Map, Use Permit, or Building Permit for any development for which this chapter applies. This section does not apply to an exempt project.

B.    Inclusionary Housing Plan. No application for a Tentative Map, Parcel Map, Use Permit, or Building Permit to which this chapter applies shall be deemed complete until an Inclusionary Housing Plan is submitted with the application. At any time during the review process, the City may require from the developer additional information reasonably necessary to clarify and supplement the application or determine the consistency of the proposed Inclusionary Housing Plan with the requirements of this chapter. The Inclusionary Housing Plan must include:

1.    The location, structure (attached, semi-attached, or detached), whether for sale or rental, size of the proposed market-rate and inclusionary units, and the basis for calculating the number of inclusionary units;

2.    A floor or site plan showing the location of the inclusionary units;

3.    The income levels to which each inclusionary unit will be made affordable;

4.    For phased development, a phasing plan that provides for the timely development of the number of inclusionary units proportionate to each proposed phase of development as required by Subsection 17.32.040.C (Standards for Inclusionary Units – Timing of construction).

5.    Any alternative means designated in Subsection 17.32.060.A (Alternatives – Developer proposal) proposed for the development along with information necessary to support the findings required by Subsection 17.32.060.B (Alternatives – Discretion) for approval of the alternatives; and

6.    Any other information reasonably requested by the City to assist with evaluation of the plan in compliance with the standards of this chapter.

C.    Inclusionary Housing Agreement. The Inclusionary Housing Agreement shall use the form provided by the City. The contents of the agreement may vary depending on the manner in which the provisions of this chapter are satisfied for a particular development. Each Inclusionary Housing Agreement shall include, at minimum, the following:

1.    Description of the development, including whether the inclusionary units will be rented or owner-occupied;

2.    The number, size and location of very low-, low- or moderate-income units;

3.    Provisions and/or documents for resale restrictions, deeds of trust, rights of first refusal or rental restrictions;

4.    Provisions for monitoring the ongoing affordability of the units, and the process for qualifying prospective resident households for income eligibility; and

5.    Any additional obligations relevant to the compliance with this chapter.

D.    Recording of agreement. Each Inclusionary Housing Agreement shall be recorded against owner-occupied inclusionary units and residential projects containing rental inclusionary units, as applicable. Additional rental or resale restrictions, deeds of trust, rights of first refusal, and/or other documents acceptable to the City shall also be recorded against owner-occupied inclusionary units. In cases where the requirements of this chapter are satisfied through the development of off-site units, the Inclusionary Housing Agreement shall simultaneously be recorded against the property where the off-site units are to be developed.

17.32.060 Alternatives

A.    Developer proposal. A developer may propose an alternative means of compliance in an Inclusionary Housing Plan as provided in Subsection 17.32.050.B as follows:

1.    Off-site construction. Units may be constructed off-site if the inclusionary units will be located in an area where, based on the availability of affordable housing, the review authority finds that the need for such units is greater than the need in the area of the proposed development.

2.    Land dedication. In lieu of building inclusionary units, a developer may choose to dedicate land to the City suitable for the construction of inclusionary units that the review authority reasonably determines to be of equivalent or greater value than is produced by applying the inclusionary obligation.

3.    Combination. The review authority may accept any combination of on-site construction, off-site construction, in-lieu fees and land dedication that at least equal the cost of providing inclusionary units on site as would otherwise be required by this chapter. The value of a proposed land dedication shall be determined by an appraiser appointed by the City.

B.    Discretion. The review authority may approve, conditionally approve, or reject any alternative proposed by a developer as part of an Inclusionary Housing Plan. Any approval or conditional approval shall be based on a finding that the purposes of this chapter would be better served by implementation of the proposed alternatives. In determining whether the purposes of this chapter would be better served under the proposed alternative, the review authority should consider:

1.    Whether implementation of an alternative would overly concentrate inclusionary units within any specific area and, if so, must reject the alternative unless the undesirable concentration of inclusionary units is offset by other identified benefits that flow from implementation of the alternative in issue; and

2.    The extent to which other factors affect the feasibility of prompt construction of the inclusionary units on the property, such as costs and delays, the need for an appraisal, site design, zoning, infrastructure, clear title, grading and environmental review.

17.32.070 Eligibility for Occupying Inclusionary Units

A.    General eligibility. No household may occupy an inclusionary unit unless the City or its designee has approved the household’s eligibility, or has failed to make a determination of eligibility within the time or other limits provided by an Inclusionary Housing Agreement or resale restriction. If the City or its designee maintains a list or identifies eligible households, initial and subsequent occupants will be selected first from the list of identified households, to the maximum extent possible, in compliance with any rules approved by the City.

B.    Occupancy. A household who occupies a rental inclusionary unit or purchases an inclusionary unit shall occupy the unit as a principal residence.

17.32.080 Owner-Occupied Units

A.    Initial sales price. The initial sales price of the inclusionary unit must be set so that the eligible household will pay an affordable ownership cost.

B.    Transfer. Renewed restrictions will be entered into on each change of ownership, with a 40-year renewal term, upon transfer of an owner-occupied inclusionary unit prior to the expiration of the 40-year affordability period.

C.    Resale. The maximum sales price permitted on resale of an inclusionary unit designated for owner occupancy shall be the lower of:

1.    Fair market value; or

2.    The seller’s lawful purchase price, increased by the lesser of:

a.    The rate of increase of area median income during the seller’s ownership; or

b.    The rate at which the consumer price index increased during the seller’s ownership.

To the extent authorized in any resale restrictions or operative Inclusionary Housing Agreement, sellers may recover at time of sale the market value of capital improvements made by the seller and the seller’s necessary and usual costs of sale, and may authorize an increase in the maximum allowable sales price to achieve such recovery.

D.    Change in title. The following requirements apply in the event of a change in circumstance, including death, marriage, and divorce, that may occur prior to the expiration of the required affordability period:

1.    Upon the death of one of the owners, title in the property may transfer to the surviving joint tenant, tenant in common, or community property holder, without respect to the income eligibility of the household.

2.    Upon the death of a sole owner or all owners, and inheritance of the inclusionary unit by a non-income-eligible inheritee, there will be a one year compassion period between the time when the estate is settled and the time when the property must be sold to an income-eligible household. A non-eligible inheritee may request and the Council may waive this requirement on the basis of hardships specified by the Council. Alternatively, the Council may authorize their continued ownership with the unit rented at an affordable rate to an eligible household.

17.32.090 Rental Units

A.    Eligibility of tenants. The owner of rental inclusionary units shall be responsible for certifying the income of the tenant to the Director at the time of initial rental, and annually thereafter. This shall be completed by viewing acceptable documentation, including income tax statements or a W-2 for the previous calendar year, and submitting, on a form approved by the City, a certification that the tenant qualifies as an income eligible household.

B.    Selection of tenants. The owner of rental inclusionary units shall fill vacant units by either:

1.    Selecting income-eligible households themselves as long as the owner complies with the publication requirements in Subsection C of this section (Publication of availability of units).

2.    Selecting income-eligible households from the City’s Section 8 Housing Choice Voucher Waiting List available from the Department.

C.    Publication of availability of units. Whenever an inclusionary unit becomes available, the owner shall publish notices of the availability of the inclusionary unit in newspapers circulated widely in the City, including newspapers that reach minority communities. The notice should briefly explain what inclusionary housing is, state the applicable income requirements, indicate where applications are available, state when the application period opens and closes, and provide a telephone number for questions. Applications may require the name, address, and telephone number of the applicant; the number of persons to occupy the household; and any other information relevant to determine whether the applicant is eligible to occupy an inclusionary unit. The owner shall submit proof of publication to the Director.

D.    Notification to City. Whenever an inclusionary unit becomes available, the owner shall immediately notify the Director in writing.

E.    Subsequent rental to income-eligible tenant. The owner of rental inclusionary units shall apply the same rental terms and conditions to tenants of inclusionary units as are applied to all other tenants, except as otherwise required to comply with this chapter (i.e., rent levels, occupancy restrictions, and income requirements) and/or government subsidy programs. Discrimination based on subsidies received by the prospective tenant is prohibited.

F.    Changes in tenant income. If after moving into an inclusionary unit the tenant’s income eventually exceeds the income limit for that unit, the tenant may remain in the unit (the “original unit”) as long as his/her income does not exceed 140 percent of the income limit for the original unit. Once the tenant’s income exceeds 140 percent of the income limit for the original unit, the following shall apply:

1.    If the tenant’s income does not exceed the income limits of other inclusionary units in the residential development, the owner may, at the owner’s option, allow the tenant to remain in the original unit at the tenant’s new applicable affordable housing cost, as long as the next vacant unit is redesignated for the same lower-income category applicable to the original unit. If the owner does not want to redesignate the next vacant unit, the tenant shall be given one year’s notice to vacate the unit. If during the year, an inclusionary unit becomes available and the tenant meets the income eligibility for that unit, the owner shall provide the tenant with the opportunity to submit an application for that unit.

2.    If there are no units designated for a higher income category within the residential development that may be substituted for the original unit, the tenant shall be given one year’s notice to vacate the unit. If within that year, another unit in the residential development is vacated, the owner may, at the owner’s option, allow the tenant to remain in the original unit and raise the tenant’s rent to market rate and designate the newly vacated unit for the original unit at the applicable affordable housing cost. The newly vacated unit must be comparable in size (i.e., number of bedrooms, bathrooms, square footage, etc.) and location (i.e., same floor, same view, etc.) as the original unit.

17.32.100 Adjustments, Waivers

The requirements of this chapter may be adjusted or waived in extreme cases if the developer demonstrates to the Council by the presentation of substantial evidence that applying the requirements of this chapter would take property in violation of the United States or California constitutions.

A.    Timing. To receive an adjustment or waiver, the developer must make a showing when applying for a first approval for the residential development, and/or as part of any appeal that the City provides as part of the process for the first approval.

B.    Considerations. In making a determination on an application to adjust or waive the requirements of this chapter, the Council may assume each of the following when applicable:

1.    That the developer is subject to the inclusionary housing requirement or in-lieu fee;

2.    The extent to which the developer will benefit from inclusionary incentives;

3.    That the developer will be obligated to provide the most economical inclusionary units feasible in terms of construction, design, location and tenure; and

4.    That the developer is likely to obtain other housing subsidies where such funds are reasonably available.

C.    Decision and further appeal. The Council, upon legal advice provided by or at the behest of the City Attorney, will determine the application and issue a written decision.

D.    Modification of plan. If the Council, upon legal advice provided by or at the behest of the City Attorney, determines that the application of the provisions of this chapter lacks a reasonable relationship between the impact of a proposed residential project and the requirements of this chapter, or that applying the requirement of this chapter would take property in violation of the United States or California constitutions, the inclusionary housing plan shall be modified, adjusted or waived to reduce the obligations under this chapter to the extent necessary to avoid an unconstitutional result. If the Council determines no violation of the United States or California constitutions would occur through application of this chapter, the requirements of this chapter remain applicable.

17.32.110 Enforcement

A.    Penalty for violation. It shall be a misdemeanor to violate any provision of this chapter. Without limiting the generality of the foregoing, it shall also be a misdemeanor for any person to sell or rent to another person an affordable unit under this chapter at a price or rent exceeding the maximum allowed under this chapter or to sell or rent an affordable unit to a household not qualified under this chapter. It shall further be a misdemeanor for any person to provide false or materially incomplete information to the City or to a seller or lessor of an inclusionary unit to obtain occupancy of housing for which he or she is not eligible.

B.    Legal action. The City may institute any appropriate legal actions or proceedings necessary to ensure compliance with this chapter, including:

1.    Actions to revoke, deny or suspend any permit, including a Building Permit, Certificate of Occupancy, or discretionary approval;

2.    Actions to recover from any violator of this chapter civil fines, restitution to prevent unjust enrichment from a violation of this chapter, and/or enforcement costs, including attorneys fees;

3.    Eviction or foreclosure; and

4.    Any other appropriate action for injunctive relief or damages. Failure of any official or agency to fulfill the requirements of this chapter shall not excuse any person, owner, household or other party from the requirements of this chapter.