Amid a lull in affordable housing development in San Carlos, a growing housing crisis and new state-mandated development goals on the way, city staff has begun brainstorming ways to encourage greater construction of the needed units.

“A lot of people have lived here for decades and decades and when they stop working they can’t afford to live here just like the younger people who were raised here and have come back after college but they can’t afford housing,” Planning Commissioner Don Bradley said during a commission study session on Monday.

By requiring developers to incorporate additional affordable units into their projects and potentially offering a stronger density bonus for the number of affordable units built, Adam Aronson, the city’s Economic Development and Housing manager said staff believes the city could entice developers to build housing along with greater affordable units.

Current city policy requires residential developments of seven units or more to list at least 15% of its units at below-market-rate, inclusionary levels on average with neighboring jurisdictions. In projects with units for purchase, 10% must be listed at moderate income levels and 5% at low. Rental projects are required to have 10% of units at very low-income levels with 5% at low income levels.

After running various scenarios, Aronson said staff found that while the city’s inclusionary levels were not likely deterring developers from building homes in San Carlos, it would also not benefit the city to increase the percentage of affordable units required to be built.

Changes staff proposed could benefit the city would be reducing the size of ownership projects that would fall under the inclusionary levels requirement to projects with five or more units. They also proposed an increase in the BMR percentage to 20% at low income, removing the moderate-income level requirement altogether.

Additionally, Aronson also suggested a modified local density bonus program that met or exceeded state levels could encourage development. As an example, he said the city could permit developers to build four market-rate units for every very-low-income unit built and two market-rate units for every low-income one.

Unlike the state’s bonus program, he said the city could also allow developers to combine the allowances, giving them bonuses for each low income and very-low income unit proposed. What the state bonus does offer that hasn’t been considered by city staff are other types of concessions like height allowances and parking ratio reductions for developers who would prefer to not add additional units.

“Each developer would need to choose for themselves which of the two programs work best for them,” Darin Smith, managing principal with the consulting firm Economic & Planning Systems, Inc., said.

While in support of the proposed changes, Commissioner Jim Iacaponi said he was not convinced they were enticing enough to encourage greater development. After running various scenarios, Aronson said the changes would cause only a slight increase in profit margins from 4.9% under the current requirement compared to a 5% yield on costs with the changes.

Commissioner Kristen Clements disagreed, arguing that even a small percentage of additional earnings can be a selling point for large developments that often face budgeting hurdles. Still, Iacaponi encouraged staff to consider additional measures before presenting the items to the council.

In agreement, commissioners suggested staff look into other types of bonuses or concessions the city could offer developers for building additional affordable units similar to the state program.

Staff will hold another study season with the City Council before bringing the item back to the Planning Commission for a public hearing and formal recommendation that would then go back to the council for final approval.

“I appreciate the considerations but it doesn’t actually seem that if we recommend this to City Council it actually moves the needle,” Iacaponi said. “Push the bounds and let them say no rather than not because it feels like we have a real problem with the units as well.”

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