NOVEMBER 1, 2005 TRACT MAP NO. 52666 Ė AFFORDABLE HOUSING AGREEMENT (APPLICANT: 3200 PALOS VERDES DRIVE WEST, LLC.) NOVEMBER 1, 2005 TRACT MAP NO. 52666 Ė AFFORDABLE HOUSING AGREEMENT (APPLICANT: 3200 PALOS VERDES DRIVE WEST, LLC.) NOVEMBER 1, 2005 TRACT MAP NO. 52666 Ė AFFORDABLE HOUSING AGREEMENT (APPLICANT: 3200 PALOS VERDES DRIVE WEST, LLC.)

TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL

FROM: DIRECTOR OF PLANNING, BUILDING AND CODE ENFORCEMENT

DATE: NOVEMBER 1, 2005

SUBJECT: TRACT MAP NO. 52666 Ė AFFORDABLE HOUSING AGREEMENT (APPLICANT: 3200 PALOS VERDES DRIVE WEST, LLC.)

Staff Coordinator: Ara Michael Mihranian, AICP, Senior Planner

RECOMMENDATION

Place the developerís request to exercise the option to purchase an existing housing unit and convert it to affordable status (a "conversion" unit) rather than construct a new housing unit on hold until the Council has an opportunity to revisit its Affordable Housing Strategy to establish a preference for the construction of new units or the purchase of existing units to meet the Cityís affordable housing goals.

BACKGROUND

On March 18, 2003, the City Council executed an Affordable Housing Agreement (referred to as "Agreement") with the developer of Tract Map No. 52666 that requires the developer to construct one new affordable housing unit within the City of Rancho Palos Verdes (see attachment). The Agreement, among other things, specifies the terms in which the affordable housing is to be constructed, including time limits.

On October 4, 2005, the developer requested that the Council consider amending the Agreement as it relates to the development standards for the affordable housing unit and the time duration to construct the affordable housing unit. Additionally, the developer requested that the Agreement be amended to allow the unit to be a rental unit rather than a for-sale unit. After considering the developerís request, the Council denied the developerís request to provide a rental unit, but agreed that the for-sale unit could be made available for-sale prior to the issuance of building permits for the eleventh lot of the subject tract rather than the sixth lot. Based on these changes, the Council directed Staff to bring back a revised Agreement to its next meeting.

On October 18, 2005, the City Council approved the amended Affordable Housing Agreement. At the meeting, the developer submitted late correspondence requesting that the City Council allow him to purchase an existing housing unit in the

City rather than constructing a new housing unit. Staff advised the developer that the Council could not consider his request that evening because it was not on the agenda. As such, the developer had no objection to the approval of the amended Affordable Housing Agreement and subsequently submitted a formal proposal requesting that the Council allow the affordable housing unit to be an existing unit rather than constructing a new unit. The developerís request is now before the Council for consideration.

DISCUSSION

According to the Regional Housing Needs Assessment (RHNA), the City is required to provide thirteen affordable ("low" and "very low") housing units. This requirement can be met by developers providing a combination of newly constructed units and/or the "conversion" of existing units to affordable units. However, pursuant to State Law, a maximum of 25% of the Cityís affordable housing requirement can be in the form of existing housing stock "converted" to affordable status. As a result, only four (25% of 13) "converted" units can be provided toward meeting the Cityís affordable housing requirement. The Trump National Project (formerly the Ocean Trails Project) was required to provide a total of eight affordable housing units, of which four units were to be new units constructed on site, and four were to be existing units, "converted" to affordable status, located elsewhere in the City. Since all four of the possible "conversion" units were going to be provided by Trump National, any subsequent developers would need to construct new housing units to meet the affordable housing requirement.

In recognition of this situation, the Affordable Housing Agreement between the City and the developer, which was originally executed on March 18, 2003 and subsequently amended on October 18, 2005, requires the developer to construct a new affordable housing unit within the Cityís boundary. However, recognizing that the Trump National project could change so that the number of required affordable housing units is reduced, Clause B-3 of the Agreement provides the developer with the option of purchasing an existing dwelling unit within the City and converting it to an affordable housing unit if the number of "converted" affordable off-site units to be provided by Trump National is reduced. However, this option can only be exercised at the Cityís sole discretion. Specifically, Clause B-3 of the Agreement states:

Purchase of existing unit. Although this Agreement requires Owner to construct a new Affordable Unit in the City, the City, at its sole option, may allow Owner to purchase an existing residential dwelling that generally complies with the criteria set forth in Paragraph 2, as determined by the Director, if another developer in the City, which was to have purchased four existing units to provide affordable housing, is excused by the City from its obligation to provide one of those units due to a reduction of the size of that project.

Earlier this year, the City Council approved a Conditional Use Permit and Tract amendment for the Trump National project that replaced sixteen housing units in Tract No. 50666 with a driving range, thereby reducing the total number of residential dwellings that are to be constructed at Trump National from seventy-five units to fifty-nine units. Trump National was required to provide a total of eight affordable units (ten percent of the seventy-five total units that were to be constructed). However, by reducing the total number of units that are to be constructed at Trump National from seventy-five to fifty-nine, the total number of affordable units that must be provided as part of that project has been reduced from eight units to six units. Since four of the six units have been constructed on-site, Trump National only needs to provide two "converted" units, thereby making available two "converted" units.

Given the approved change to the Trump National Project that has created the availability of two "converted" units, the developer of the subject tract is requesting that the City Council allow him to exercise the option to purchase an existing dwelling unit, which would then be sold as an affordable unit, rather than constructing a new affordable dwelling unit. According to the developerís attorney, if the Council accepts the developerís request, the developer is prepared to purchase an existing 1,209 square foot, two bedroom, condominium unit for purposes of adhering to the Affordable Housing Agreement (see attachment). If the Council approves this approach and the unit is purchased, the developer will be required to record a deed restriction on said unit ensuring that the property will remain as an affordable housing unit for a period not to exceed thirty years per the attached Agreement.

Staff believes that the developerís request raises some affordable housing policy issues that have not been previously addressed by the City Council, such as:

    1. How does the City decide who builds new affordable housing units versus who gets to "convert" existing housing units?
    2. Should the City Council create a policy that establishes a preference for constructing new units versus "converting" existing units if the "conversion" of existing units is an available option?
    3. If the "conversion" of existing units is available as an option, is there a preference for the "conversion" of single-family residential units versus condominium units?

On December 7, 2004, the City Council established its current Affordable Housing Strategy which consists of meeting the Cityís Affordable Housing Goals through the combination of constructing new affordable units as part of the proposed Crestridge project and the implementation of a rental subsidy program using existing rental units within the City. At that time, the City Council did not address the policy issue of "converting" versus constructing new affordable units since the option to provide "converted" units was not available due to the Trump National affordable housing solution. Therefore, unless the City Council believes that it has enough information to consider the developerís current request, Staff is recommending that the developerís request be placed on hold until the City Council has the opportunity to address the policy questions that Staff has identified.

CONCLUSION

Staff recommends that the City Council place the developerís request to exercise the option of purchasing an existing housing unit rather than constructing a new housing unit for purposes of providing an affordable housing unit pursuant to the Affordable Housing Agreement for Tract Map No. 52666 on hold until the City Council has an opportunity to provide policy direction to Staff.

ALTERNATIVES

In addition to Staffís recommendation, the following alternatives is available to the City Council:

  1. Deny the developerís request and require the developer to construct a new affordable housing unit; or,
  2. Since the Trump National project has been amended so that the opportunity exists for other developers to meet the Cityís affordable housing requirement by providing a "conversion" unit and the developer of Tract 52666 is the only current developer that must provide an affordable housing unit, approve the developerís request to exercise his option to provide a "conversion" unit rather than constructing a new unit.

Respectfully submitted:

Joel Rojas, AICP

Director of Planning, Building

and Code Enforcement

Reviewed,

Les Evans

City Manager

ATTACHMENTS (the following attachments are not available electronically and can be viewed at City Hall):