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In an effort to accelerate the speed at which affordable housing units are built in San Carlos, officials on Monday approved updates to the city’s inclusionary housing ordinance to require residential apartment building developers to include such units within their plans.

By requiring rental housing developers building projects with seven or more housing units to designate at least 15% of the units as below market-rate, the proposal to update the city’s housing ordinance brings the requirements for those aiming to build rental projects closer in line with the rules in place for those building for-sale residential units, explained Martin Romo, the city’s economic development and housing manager.

Community Development Director Al Savay said those developing residential rental buildings are allowed to pay an in-lieu fee contributing to the city’s affordable housing fund instead of designating 15% of the units in their projects as affordable. Because of that, Savay added developers are opting to pay in-lieu fees.

Developers of residential ownership projects are currently required to offer 15% of the units in their projects at rates affordable to moderate- and low-income households. As an alternative to including affordable units within their projects, they can increase the number of bedrooms in some of the below-market rate units, offer units at rates affordable to very low-income and extremely low-income households or build affordable units on another site, but only if there are 10% more affordable units provided, according to a staff report.

Councilwoman Sara McDowell acknowledged the council’s unanimous decision to update its inclusionary housing policy Monday is one step among many they hope to take to boost the city’s affordable housing stock. But she noted the change may help address the city’s urgent need for more units now as officials continue to explore long-term strategies for boosting the city’s housing stock.

Having pegged workforce housing as a priority earlier this year, the council is slated to discuss other possible updates to its inclusionary housing policy in the coming months, said Savay, who noted research and analysis on potential updates like a reduction in the parking required of residential developments and minimum density standards could be available in the winter for discussion.

“I think short-term ordinance fixes like this one — where we make it very clear that we need to increase our housing stock and do away with our in-lieu fees — is an excellent step in the right direction,” said McDowell, according to a video of the meeting. “It will ensure that the housing that is getting built right now includes the units that we need right now.”

Though the change officials approved Monday eliminated the option for residential developers with projects of seven units or more to pay in-lieu fees, contributing to the city’s affordable housing fund will be an option for residential developers building two to six units. The proposal also gave developers of larger residential projects alternative ways to comply with the 15% affordable housing requirement, including increasing the total number of bedrooms in affordable units, providing units at a greater level of affordability, building 10% more affordable units off site and converting existing for-sale units into affordable rental units, said Romo.

Developers of for-sale projects with seven or more units will be required to designate 10% of the units at rates affordable to moderate-income households and 5% of the units at rates affordable to low-income households. Rental housing developers with projects seven units or larger will be required to offer 10% of the units at rates affordable to very low-income households and 5% of the units in a given project at rates affordable to low-income households.

Mayor Mark Olbert wondered whether the council could consider requiring residential developers proposing larger projects to designate 20% of the units as affordable and also lower the threshold at which developers are required to build the below market-rate units on site from seven units to five units. He also hoped officials could consider requiring developers to build units at specific levels of affordability, depending on the city’s need for units affordable for households of a certain income at a given time.

Though councilmembers expressed interest in studying those changes more closely, they largely favored waiting until staff analyzes them more closely to understand their effects and whether any possible changes could deter housing development.

For resident Brian Perkins, how officials will monitor an option for developers to convert existing for-sale housing units to affordable rental units if they cannot provide on-site, affordable units was a concern. Though officials agreed to move forward with the proposed changes and continue to study further changes to the ordinance, Councilwoman Laura Parmer-Lohan asked staff to keep an eye out for potential loopholes to the rules.

Romo said the second reading of the ordinance is slated for Aug. 26 and the requirements will go into effect 30 days after they are adopted.

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