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HomeMy WebLinkAbout08.d. Provide direction to staff regarding legislative changes affecting collection of capacity fees for accessory dwelling unitsCentral San BOARD OF DIRECTORS POSITION PAPER Board Meeting Date: December 15, 2016 Subject: PROVIDE DIRECTION TO STAFF REGARDING LEGISLATIVE CHANGES AFFECTING COLLECTION OF CAPACITY FEES FOR ACCESSORY DWELLING UNITS Submitted By: Thomas Brightbill, Senior Engineer REVIEWED AND RECOMMENDED FOR BOARD ACTION: Initiating Dept./Div.: Engineering & Technical Services / Planning & Development Services 8.d. D. Gemmell — Planning & Development Services Division Mgr. � JM. Petit — Director of Engineering & Technical Services Kenton L. Alm Roger S. Bailey Counsel for the DistriGeneral Manager ISSUE: Recent legislative changes may affect Central San's ability tocollect Capacity Fees for certain Accessory Dwelling Units (ADU). It is appropriate for the Board of Directors to review these changes and to provide policy -level input to staff. BACKGROUND: In September 2016, Governor Jerry Brown signed three bills which may affect Central San's ability to collect Capacity Fees. The bills are: AB 2406. This bill defines Junior ADUs and prohibits the collection of Capacity Fees and sewer service charges for such units. The units must be less than 500 square feet, must be contained entirely within an existing structure and must include an existing bedroom. Staff believes that most all of these projects will not meet Central San's existing definition of a second living unit. AB 2299/SB 1069. These bills define ADUs of less than 1,200 square feet. AB 2299 provides clarifying language for SB 1069. It eliminates Capacity Fees for ADUs that are "contained within the existing single-family residence or accessory structure" and requires that Capacity Fees for other ADUs be proportionate based on size or fixture count. District Counsel has reviewed the bills and has stated that, as currently written, all three bills do not apply to special districts such as Central San. As currently defined in AB 2299/SB 1069, "Local Agency means a city, county or city and county whether general law or chartered." Staff and District Counsel believe that the intent was clearly to include special districts and that it very likely the legislation will be revised shortly to explicitly include special districts. There has been substantial publicity about ADUs (Attachment 1). Much of it is related to the need for additional infill and low-income housing. We believe that several of the cities in our service area will be revising their ordinances to conform to the legislation and streamline the process for permitting accessory units. These actions along with the Page 1 of 4 POSITION PAPER Board Meeting Date: December 15, 2016 Subject: PROVIDE DIRECTION TO STAFF REGARDING LEGISLATIVE CHANGES AFFECTING COLLECTION OF CAPACITY FEES FOR ACCESSORY DWELLING UNITS general publicity has resulted in a number of requests to waive or reduce fees for second living units. The current District Code and Capacity Fee ordinance set the gravity zone Capacity Fee at $5,038 for a second living unit which is 84.7% of the fee for a detached single family residence. An additional pumped zone Capacity Fee is charged for second living units in pumped zones. Central San's current fee structure does not comply with the new definitions and limitation on collection of Capacity Fees under the new legislation. ALTERNATIVES/CONSIDERATIONS: Staff has developed several alternatives. Take No Immediate Action Since the current legislation does not apply to special districts, there is no legal need to implement any changes at this time. However, given the public awareness of this legislation and surprise that it does not apply to Central San, staff at the permit counter need to have direction from the Board to address fee collection under Central San's current code provision, for inquiries from both city staff and new ADU applicants. Develop an Interim Program Rather than revise District Code prior to the anticipated revisions to the legislation, staff proposes to create an interim program to address Capacity Fees for ADUs until State Legislature makes their revisions. Staff proposes the following features: • The program would run for a defined length of time and would end once the current legislation has been modified by the legislature. • For projects that appear to be exempt from Capacity Fees if the legislation becomes applicable, staff would not collect a Capacity Fee. • For projects that fall under a reduced Capacity Fee category, staff would collect a Capacity Fee based on our understanding of the limitations. • Central San and the property owner would enter in to a signed agreement which could be recorded against the property. The agreement would require that once the legislation has been revised, Central San would refund any excess Capacity Fees or invoice property owners for any balance owed. Any unpaid fees would be declared delinquent and placed on the property tax bill. • Regardless of future legislation, the gravity zone Capacity Fee collected through this program would not exceed the current gravity zone Capacity Fee of $5,038 for second living units. Similarly, the maximum pumped zone Capacity Fee would Page 2 of 4 POSITION PAPER Board Meeting Date: December 15, 2016 Subject: PROVIDE DIRECTION TO STAFF REGARDING LEGISLATIVE CHANGES AFFECTING COLLECTION OF CAPACITY FEES FOR ACCESSORY DWELLING UNITS not exceed the current pumped zone Capacity Fee contained in the current Capacity Fee ordinance. A quick review of the elements of this suggested program (Attachment 2) highlight that there are several potential alternative approaches. Staff is open to direction as to potential alternative interim programs and will bring the formal program back to the Board in January 2017. Update District Code Now As an alternative, the Board of Directors could direct staff to prepare an update to District Code without waiting for updated legislation from the State Legislature. This would require setting a public hearing in early 2017 and possible subsequent changes dependent upon the language of the final legislation. If we proceed with adopting modified code provisions now based on the new legislation, there are a number of policy questions that staff needs guidance on before drafting the amended language. There are issues such as retroactivity (refunds for recent permits), enforcement of prior illegal second unit connections, and interpretation of ambiguous provisions in the new legislation. For instance, a key term in the legislation for determining whether fees are due being whether the new unit is contained in an "existing structure". The statute does not indicate whether that is existing as of January 1, 2017, or existing at the time a future permittee seeks to convert the structure to an ADU. FINANCIAL IMPACTS: For Fiscal Year 2015-16, approximately 44 applications for second living units were processed and approximately $222,000 in Capacity Fees were collected. If the number of ADUs continues at approximately the same rate, then Central San could see an annual reduction in Capacity Fees of up to $250,000. A more precise figure is difficult to estimate as the new legislation is intended to increase construction of ADUs, and the mix of fee -exempt vs. reduced -fee projects is unknown. AB 2406 prohibits collecting a sewer service charge for Junior ADUs. Since these units do not seem to meet Central San's current definition of a second living unit, there would appear to be no effect on sewer service charge revenue. AB 2299/SB 1069 do not contain any prohibitions on annual sewer service charges, so no effect on Central San's sewer service charge revenue is anticipated. COMMITTEE RECOMMENDATION: This matter was reviewed by the Administration Committee on November 7, 2016. The committee provided input to staff. Page 3 of 4 POSITION PAPER Board Meeting Date: December 15, 2016 Subject: PROVIDE DIRECTION TO STAFF REGARDING LEGISLATIVE CHANGES AFFECTING COLLECTION OF CAPACITY FEES FOR ACCESSORY DWELLING UNITS RECOMMENDED BOARD ACTION: Review the legislative changes and provide direction to staff via motion by taking one of the following near-term courses of action: 1. Direct staff to develop an Interim Program (with deferral and property agreement or alternative), or 2. Direct staff to develop language to amend District Code in early 2017, based on AB 2406, AB 2299 and SB 1069, or 3. Provide other direction as appropriate, or 4. Take no action until the legislation applies to special districts. Attached Su000rtino Documents: 1. News Articles dated December 3, 2016 and August 15, 2016 2. Summary of Proposed Interim Program for Accessory Dwelling Units 3. PowerPoint Presentation Page 4 of 4 Attachment 1 New California housing laws make granny units easier to build By Kathleen Pender December 3, 2016 Photo: Scott Strazzante, The Chronicle On their way to check the mail, Toni Gardner and her granddaughter Amelia, 2, leave the small house that she had built in the backyard of her residence in Santa Cruz, Calif., on Thursday, December 1, 2016. California homeowners should find it easier and cheaper to build a second unit on their property, or turn an illegal unit into a legal one, thanks to two laws that take effect Jan. 1. The laws, along with a third that took effect in September, will ease or eliminate the off- street parking requirements and often -enormous utility -hookup fees that homeowners face when they create a second dwelling, often called an in-law or granny unit. One set of rules will apply if the second unit is created within an existing space — such as a bedroom, basement, attic or garage. Another set will apply if the new unit, whether attached or detached, adds square footage outside or on top of existing structures. Homeowners will still have to comply with local building codes, find a contractor and arrange financing. Sylvia Krug, who is looking to convert bedrooms in her Novato home into a rental unit, said she interviewed three contractors "and they all have yearlong waiting lists." The new laws won't come close to filling the Bay Area's housing needs. But they could create options for middle-income renters who don't qualify for below -market -rate housing and can't afford a market -rate apartment. They also could help homeowners meet their mortgage payments, seniors stay in their homes with an on-site caregiver, and multigenerational families live together, but not too together. Photo: Scott Strazzante, The Chronicle Toni Gardner plays with her grandchildren, Amelia, 2, and Jonah, 5, in the second unit that she had built in the backyard of her residence. The new laws would have removed some of the obstacles, she said. Toni Gardner just moved into a granny cottage she had built in the backyard of her home just outside Santa Cruz. Gardner built the cottage so her son and his family could move into the main house from a mobile home in Prunedale (Monterey County). She watches her grandkids in the afternoon while her son and daughter-in-law are at work. "It was a long, hard road with lots and lots of obstacles," Gardner said. Some of those roadblocks, such as converting most of her backyard into three parking places and paying more than $20,000 in water hookup fees, would have been reduced under the new laws. The laws that take effect Jan. 1 — AB2299 and SB1o69 — amend the state law governing second units and rename them "accessory dwelling units." About two-thirds of California's cities and counties have their own second -unit ordinances, but the state law is more permissive than most of them. Jurisdictions that have not adopted or amended a local ordinance that complies with the new state law by Jan. 1 will have to follow the state law until they approve a compliant one. Under the new law, second units are allowed on any lot with a single-family home, but local ordinances can say where they will or won't be permitted based on factors such as water and sewer services, traffic flow and public safety. The amended law will allow accessory units up to 1,200 square feet, but allows jurisdictions to impose lower limits and establish standards governing height, setback, lot coverage, landscaping and architectural review. The state law does not prevent homeowners from renting out the second unit to short- term guests or require them to live in one of the units. But local jurisdictions can require one of the structures to be owner -occupied and regulate rentals of less than 3o days, as San Francisco does. Photo: Scott Strazzante, The Chronicle Toni Gardner's grandchildren, Jonah, 5, and Amelia, 2, play in the small house that Gardner had built in the backyard of her residence near Santa Cruz. o3 When a homeowner submits a second -unit application that meets state and local requirements, the local jurisdiction must approve it within 120 days, without the need to notify neighbors. Some cities are rushing to conform their ordinances by Jan. 1 or soon thereafter. But there are a lot of unanswered questions. "It's a confusing set of regulations, that, in the opinion of this planner, has a lot of gray zones," said Neal Toft, Larkspur's planning and building director. The California Department of Housing and Community Development plans to issue guidance on the law in a week or two. "We are in a housing crisis," said Paul McDougall, the department's housing policy manager. "Local governments should embrace this as a way to create" accessory dwelling units. For most homeowners, the bill will remove a big impediment to second -unit creation: the need to create off-street parking. For units created within an existing space, cities and counties cannot require any additional parking. For units outside that space, cities can require one additional parking space per bedroom created. However, this requirement is waived if the home is within one-half mile of public transit, within a block of a car -share vehicle, in an architecturally and historically significant district, or if on -street parking permits are required but not offered to the second -unit occupant. If new parking is required, it generally can be provided as tandem parking on an existing driveway or in setback areas (the space between your home and property line that is supposed to be empty), unless this would not be feasible based on topography or safety considerations. The law also will let homeowners create a second unit within existing space, such as a garage, that sits within a setback area. The other big bonus is the reduction or elimination of certain fees. Today, some water and sewer districts levy the same hookup fees on tiny second units that they charge on a full- fledged home. These fees can reach into the tens of thousands of dollars. In the future, on second units built within existing space, utilities cannot require the homeowner to install a new or separate utility connection, nor can they impose a connection fee or capacity charge. For units outside existing space, they can require a new or separate connection, and can charge a connection fee or capacity charge, but it must be "proportionate to the burden" of the second unit based on its size or number of plumbing fixtures. San Jose has updated its zoning code to adopt the mandatory provisions of the new state law. "We had already started in the direction of making it easier to build secondary dwellings," said Jenny Nusbaum, San Jose's supervising planner. "We wanted to update our code before the the state law kicked in so we could, as much as possible, maintain local control." Among other things, San Jose reduced the minimum lot size needed to build a second unit from 6,000 square feet for attached and 8,000 square feet for detached to 5,445 feet for either type. Russell Feirstein is in the design phase for a second unit on a quarter -acre lot he owns in San Jose. When his architect sent him San Jose's revised code, "all the barriers that I had seemed to be lower, which had me dancing for joy." Feirstein and his late wife bought the home about 10 years ago, "when it was a piece of junk. We slowly fixed it up" and rented it out. Their long-term plan was to build a granny unit on the property to increase their retirement income. Alternatively, they thought their children might use it one day or live in it themselves, "God forbid, if something happens," he said. A third law, AB24o6, which took effect when Gov. Jerry Brown signed it in September, gives cities the option of allowing homeowners to create a "junior accessory dwelling unit." This is a unit created within an existing bedroom that has an efficiency kitchen (no gas or o appliances requiring 220 volts) and an interior connection to the main house. This can be two doors with separate locks, like adjoining hotel rooms. This is probably the cheapest way to create a second unit because there is no need for a separate address, heating unit or fire separation, said Rachel Ginis, founder of Lilypad Homes in Corte Madera. San Jose has not adopted this option because it requires one of the units to be owner - occupied. "We would rather have the flexibility of having someone rent out both units," Nusbaum said. Larkspur has adopted it. "We are excited about the junior (accessory dwelling units) for people to age in place or have a tenant in a smaller unit, to reuse the single-family home without demanding additional parking, and to do it in an affordable manner," Toft said. Kathleen Pender is a San Francisco Chronicle columnist. http://www.sfchronicle.com/24hrsale/article/New-California-housing-laws-make-granny-units-10688483.php 0 Affordable housing 101: Why not build more granny units? By Richard Scheinin 1 rscheinin@bayareanewsgroup.com PUBLISHED: July 26, 2016 at 3:36 pm 1 UPDATED: August 15, 2016 at 9:17 am MENLO PARK — Erin Craig and Rich Dvorak knew it was time: Their grown daughter, who has severe disabilities, needed her own home. But where? They decided to build a private studio for Kim — a separate apartment inside the family home in Palo Alto, where they had lived for 25 years. But Palo Alto has notoriously strict zoning rules for add-on units. So the couple scoured the Peninsula, hunting for a new house — only to discover that each city had its own patchwork of restrictions. "I went shopping for our house with a 50 -foot tape measure, because you have to measure all the setbacks," Craig said. "It got complicated." It almost always does. Amid the Bay Area's housing crunch, a movement to ease restrictions on accessory dwelling units — officially referred to as ADUs, or informally as "granny flats," companion units or in-law apartments — has gained traction in the last year. Local initiatives to relax land -use rules and liberalize permitting procedures have sprung up around the bay, as communities from San Jose and Palo Alto to Concord have adopted or are considering new ordinances. "It's a policy initiative whose time has come," said Denise Pinkston, housing co-chair for the Bay Area Council, a prime mover behind some of the initiatives. If just 10 percent of the Bay Area's 1.5 million owners of single-family homes were to create granny flats for family members or other tenants, that would add 150,000 new units — most of them affordable — to the region's infamously tight housing supply. So says a growing number of affordable housing advocates — as well as a number of state legislators, who have proposed bills requiring municipalities to cut red tape and speed up permitting for this class of small, rentable dwellings, which can include backyard cottages and apartments within homes. The bills also would reduce some of the fees that can add a deal -breaking $10,000 to $60,000 to an accessory unit project. "Nobody who's sane is going to pay those fees," said Sen. Bob Wieckowski, D -Fremont. Wieckowski's Senate Bill 1069 has passed the state Senate and is expected to come up for a vote in the Assembly next month. Among other provisions, it would prevent water and sewer agencies from charging hookup fees for ADUs built within an existing house or in an existing detached unit on the same lot. Because many jurisdictions treat accessory units as if they were new single-family homes, Wieckowski said, "You pay the same fees you're paying for a McMansion. Come on!" Faced with those costs, thousands of homeowners build illegal units, bypassing safety codes — and depriving towns and cities of revenue that would accrue from legal units. I`. "We see it time and again," said Kevin Casey, whose Emeryville -based company, New Avenue, manages the design and construction of accessory units. "People go, `What? You're going to charge me to do something in my own home?' The impact fees kill projects." But momentum may be shifting. New ordinances have been adopted in Concord, Oakland and Berkeley, as well as in San Francisco, Redwood City, Portola Valley and Half Moon Bay. San Jose, Mountain View and Palo Alto are all discussing new ordinances, as is San Mateo County, which wants to see more ADUs in unincorporated areas. Why all the interest right now? After World War II, as returning GIs and their families flooded the suburbs, there was a construction boom of single-family homes on large lots. To this day, many neighborhoods hold onto a "Leave it to Beaver" self-image, built around the nuclear family. "There are people who think the single-family home is in the Bill of Rights — it's sacred and there should not be ADUs or more cars on the street," said Michael Brilliot, a San Jose planner involved with discussions for a new city ordinance governing ADUs. But in 2016, hardly anyone is untouched by the housing crunch. A recent Bay Area Council poll showed that one-third of the region's residents are thinking of leaving because of housing costs and traffic congestion. Increasingly, ADUs are held up as a relatively easy way to increase housing density while attending to the needs of college students, millennials, single parents, empty nesters and the elderly — among the many who can't afford, don't want or no longer need big single-family homes. "Where is the housing for these people?" asked Rachel Ginis, a Marin -based residential designer and general contractor. Ginis founded the nonprofit Lilypad Homes to promote the creation of "junior accessory dwelling units" of 500 square feet or less — a subclass of ADUs championed by Sen. Tony Thurmond, D - Richmond, whose own bill, AB 2406, is moving through the Legislature. Typically, a junior unit is created by doubling up an interior door — allowing a homeowner to secure the master bedroom and bath — to create a rental unit within a house, then adding a private entrance and kitchenette. "Families have morphed over time," Ginis said, "and yet our ideal of a single-family home goes unchanged. Our houses are not sufficiently flexible to change when people's lives change — when an elderly relation becomes ill, when the kids go off to college, when a homeowner needs supplemental income to pay the mortgage." It's time to think outside the box, because the housing crisis "isn't going away any time soon," said Karen Chapple, a UC Berkeley professor and housing specialist whose 2012 study of five East Bay communities showed that about 30 percent of homeowners expressed interest in an ADU. "As soon as we get our next 2 million residents over the next 30 years, we're going to have to invent new things like this," she said. "We need to find solutions." Chapple built her own 420 -square -foot cottage in her Berkeley backyard — and rents it out for $1,500 a month, though she said she could charge twice that in the current market. While some opponents of accessory units predict that most would fall into the hands of landlords looking to maximize rental charges, Chapple doubts that. Her research shows that just 38 percent of ADUs are rented to strangers; 25 percent are rented to family or friends, typically at reasonable rates, while 37 percent are used by homeowners as housing, office or studio space. Els de Graauw, an assistant professor at the City University of New York, appreciated the cozy — to say the least — comforts of Chapple's unit when she rented it earlier this summer. "It has a little bit of a porch, so I can sit outside and have my breakfast, while looking out at this beautiful yard full of flowers," she said. "The tiny house — that's how I think of it — has big French doors, so it feels airy, even though it's small. "And the kitchen has everything you would want, even a dishwasher. I live in Brooklyn, and I don't have a dishwasher in Brooklyn, so I feel this is quite luxurious." Erin Craig and Richard Dvorak are satisfied, too. It took about eight months, but they finally bought a suitable house in Menlo Park. They converted the garage into a 640 -square -foot studio with a private entrance — and daughter Kim, 26, has a home. The fees were high — about $15,000 — and the construction costs were "ridiculous." But in the end, Craig said, "It worked out really well. It's a really nice solution for us. Our daughter is happy." The parking problem Opposition to accessory units often has hinged on the additional vehicles they can bring to neighborhoods. But advocates say fears of congestion are overstated because attitudes about cars have changed: Many students and millennials don't own them, preferring to take Uber or ride BART, especially if they live near transit hubs. Under legislation proposed by Sen. Bob Wieckowski, D -Fremont, local governments could not require additional parking spaces for ADUs located within a half -mile of public transit or shopping. Similarly, a new ordinance in Oakland waives the additional parking requirement for units a half -mile or less from a BART station or other major transit stop. "People have varying concerns about traffic and parking and aesthetics and maintaining open space — so maybe the rules for ADUs can vary from neighborhood to neighborhood," said Palo Alto City Councilman Cory Wolbach, who hopes the city will have a fine-tuned ordinance in place by next summer. He imagines a permitting process in which a number of preapproved plans for ADUs would be kept on file with the city. Each plan would be suited to a particular architectural style: If you own an Eichler home with double -sliding doors between backyard and master bedroom suite, one set of plans would show you how to turn that suite into a separate unit. - Richard Scheinin, read his stories at www.mercurynews.com/richard-scheinin http://www.eastbaytimes.com/2016/07/26/affordable-housing-101-why-not-build-more-granny-units/ Attachment 2 Summary of Proposed Interim Program for Accessory Dwelling Units Effective January, 1, 2017 If any legislative changes before July 1, 2018 which result in an increased capacity fee, the property owner agrees to pay the difference within 60 days of invoice or have that amount (along with penalties and interest) placed on their property tax bill. If legislative changes reduce or eliminate the fee, Central San will refund it to the applicant who paid the fee. Property owner agrees to disclose the agreement if the property is sold. Agreement may be recorded against the property at the option of Central San. Ends January 1, 2018 if no legislative change or if no additional action by Central San Board of Directors. Project Description 500 square feet (SF) max, attached, uses 1 existing bedroom, meets all AB 2406 criteria 1,200 SF max, within existing space. May be attached or detached. Attached may not exceed 50% of existing living are (no restriction on detached) Our Understanding of AB 2406, AB 2299/SB 1069 No capacity fee may be charged. No capacity fee may be charged. 1,200 SF max, not within existing space. May be Capacity fee may be attached or detached. No restriction on charged on "proportionate" percentage of existing space basis Not meeting any of the criteria above Attachment 2 AB 2406 and AB 2299 interim program.docx No restrictions Sign Agreement Proposed Capacity Fee Collected no None yes yes None Proportionate based on ADU square feet 1,200 square feet multiplied by 0.847 RUEs no Collect 0.847 RUEs