Rancho Palos Verdes City Council
   

DECEMBER 7, 2004 EXPENDITURE OF AFFORDABLE HOUSING FUNDS DECEMBER 7, 2004 EXPENDITURE OF AFFORDABLE HOUSING FUNDS

TO:HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL

FROM:DIRECTOR OF PLANNING, BUILDING AND CODE ENFORCEMENT

DATE:DECEMBER 7, 2004

SUBJECT:EXPENDITURE OF AFFORDABLE HOUSING FUNDS

Staff Coordinator: Gregory Pfost, AICP, Deputy Planning Director

RECOMMENDATION

That the City Council direct Staff to pursue a combined program to utilize its affordable housing funds for: 1) a contribution toward development of an affordable housing component as part of the Crestridge site; and 2) implementation of a rental subsidy program managed by a non-profit housing agency.

EXECUTIVE SUMMARY

The City has reached a critical point in which it needs to consider which program(s) it would like to focus its affordable housing resources towards. Although the City has some time before its In-lieu Affordable Housing Funds need to be spent, its RDA Housing Fund will reach the $1 million threshold this month, thereby starting a 1-year deadline to come up with a program to expend its excess surplus funds and an additional 2 years to implement such a program. To avoid losing the excess funds and potentially risk financial penalties to other non-housing Agency funds, it is important to begin discussion as to what program(s) the City shall focus its resources upon. To that end, this report serves to provide information to the Council on the status of the City’s affordable housing funds and programs that the Council may consider for expenditure of these funds.

BACKGROUND

Why is there a need for Affordable Housing and what is the City's obligation to provide for it?

In a report entitled "California's Deepening Housing Crisis", authored by the California Department of Housing and Community Development (HCD), it is projected that California's population will increase by around 600,000 persons annually over the next decade. Unfortunately, housing production within the state has not kept pace with past population increases, nor is it expected to keep pace with projected future population increases. This disparity leads to an increase in demand for housing, higher housing costs, and subsequently a greater demand for affordable housing.

HCD's mission is "to provide leadership, policies and programs to preserve and expand safe and affordable housing opportunities and promote strong communities for all Californians". One of HCD's goals is to increase the supply of housing, especially affordable housing. To help meet this goal, HCD is charged with administering state housing law. State housing law affects all cities and counties within the State by requiring each to prepare and adopt a General Plan Housing Element. According to State law, the City's Housing Element "shall consist of an identification and analysis of existing and projected housing needs and a statement of goals, policies, quantified objectives, financial resources, and scheduled programs for the preservation, improvement, and development of housing". So, regardless of individual opinion of HCD's mission statement and implementation goals, and whether the City should be required to increase its housing stock while also providing for affordable housing, it is still incumbent upon the City to comply with State housing law.

To satisfy State requirements, the City's Housing Element must include certain components, one of which is an assessment of housing needs, as prescribed by State housing law. The assignment of a City's housing construction need has always been one of the most difficult aspects of housing law. Currently, based upon population projections, existing housing supply, economics and other factors, the State determines the total construction need for each region - meaning how many new housing units need to be constructed in the region to meet the region's need over the next 5 years. In our region HCD provides the construction needs number to the Southern California Association of Governments (SCAG), who is then responsible for disaggregating that number amongst all of the cities and counties in the SCAG region. This process is called the Regional Housing Needs Assessment (RHNA).

State housing law requires cities and counties to update their Housing Element every 5 years. In compliance with State law, the City of Rancho Palos Verdes adopted an updated Housing Element in August 2001. The City's Housing Element "needs analysis" is based upon the RHNA that was provided by SCAG. The City's share of the regional housing need as allocated by SCAG for the January 1, 1998 through June 30, 2005 planning period is as follows:

RHNA Construction Need for RPV

Income Category

Number of Housing Units

Very Low

8

Low

5

Moderate

8

Above Moderate

32

Total

53

It is important to note that it is not the City's responsibility to actually develop and build these units. State law only requires that a City show that there is adequate sites for these units, that the City assist in the development of housing to meet the needs, and remove governmental constraints where appropriate and legal. The City's Housing Element currently shows that there is land available to construct these new housing units. For example, the Housing Element identifies the Ocean Trails project and the RDA's parcel located on the northwest corner of Crestridge Road and Crenshaw Boulevard as sites that can meet the 13-unit low and very-low income affordable housing need. It is important to note that, at this time, there are no penalties for a city not reaching its RHNA target. However, based upon the continuing housing crisis in the State and previously proposed legislation, Staff would expect that in the future, there may be legislation that would penalize a City for non-compliance.

How are affordable income levels derived and who fits into these income levels?

According to the U.S Department of Housing and Urban Development (HUD), affordable housing means that families should devote no more than 30% of their income to rent or mortgage payments and utilities.

The different levels of affordability are based upon a percentage of County median income, as follows:

Very Low Income Level = 0-50% of Median Income

Low Income Level = 50-80% of Median Income

Moderate Income Level = 80-120% of Median Income

Above Moderate Level = +120% of Median Income

According to HUD, the 2004 median family income for a four-person household in Los Angeles County is $55,100. Based upon this figure, it is determined that for a four-person household, the maximum income for a "Very Low Income" family is $29,750, a "Low Income" family is $47,600, and a "Moderate Income" family is $66,100. Housing cost per affordability level is then considered. For example, a "Very Low" income family of four making $29,750 is not expected to pay more than $743.75/month in housing costs ($29,750 max. income x 30% housing costs = $8,925/12 months = $743.75/month). During the preparation of the City's Housing Element in 2000 a survey was conducted of existing rental units in the City and it was found that only about 10% of the total rental units surveyed had monthly rents of less than $1,000. Subsequently, in this example, a Very Low Income family would most likely not be able to find a rental unit in the City. If they could, the survey showed that of the rental units less than $1,000, 24% of those were studio units, while 76% were one-bedroom units. For a family of four, this would lead to overcrowding.

 

When speaking of "Affordable Housing", there is a myth that the people who need and live in affordable housing will not fit into respected neighborhoods. It is important to identify who these people really are. Households earning lower incomes can have a variety of occupational and educational backgrounds. In an example presented by HCD in their report entitled, "Myths and Facts About Affordable and High Density Housing", it states that a starting elementary or high-school teacher in the City of Mountain View (Santa Clara County) with a gross monthly income of $3,200 (annual income of $38,400) can afford to pay $960 a month in rent, which qualifies as "Low" Income if she lives alone and "Very-Low" Income if she supports two children. Another example is that of a starting air-traffic controller in San Diego County, with income barely higher than $31,000 a year, would also qualify for affordable housing. Other occupations, such as librarians, sheriffs' deputies, nurses, fire fighters, who are vital members of our communities, also fit into persons/families who need affordable housing.

Has the City met its required construction need as determined through the 1999 RHNA?

As of the date of this report, although the City has not met all of its required construction need for the planning period (January 1, 1998 to June 30, 2005), as shown in the table below, the City has met most of it.

 

Income Category

Number of Housing Units Required (RHNA)

Number of Housing Units Provided

Very Low

8

2

Low

5

2

Moderate

8

4

Above Moderate

32

32(1)

Total

53

40