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Zoning Ordinance Amendment 2015 -03 <br />July 20, 2015 <br />Page 2 <br />On October 27, 2014, the City Council adopted the Adaptive Reuse Ordinance (ARO) to allow the <br />reuse of vacant and/or obsolete buildings within specific areas of the City. One of the provisions of <br />the ARO, Section 41 -1652 (d)(1), requires all adaptive reuse projects to comply with the HOO. <br />Project Analvsis <br />A review of the contents of the MOO has revealed that certain components of the ordinance prevent <br />staff from consistent implementation of the ordinance. In reviewing the existing ordinance, staff has <br />identified a few areas that warrant a revision to the existing Housing Opportunities Ordinance. <br />Issues to (Consider, <br />In examining the existing ordinance, staff has identified the following items as points of confusion <br />that may be impediments to new housing production and production of new affordable housing units <br />in the city: <br />Constraints on Adaptive Reuse of Historic Structures and Retrofitting of Existing <br />Buildings - This particular issue revolves around the cost of adaptive reuse of historic <br />buildings (which has the public benefit of preserving historic resources by making them <br />economically productive) or retrofitting of existing building stock for a new use, typically <br />switching the use from commercial to residential, thereby minimizing the carbon footprint of <br />the reuse of the building and eliminating the need to turn such buildings into landfill. In both <br />categories, the inclusionary housing requirement adds a cost to the developer on the already <br />high cost of restoration and retrofitting of the existing buildings, which can be costly due to <br />extensive fire and building safety upgrades necessary. <br />Already Built or Entitled (but not Built) Projects - The existing HOO does not fully <br />consider the economics of inclusionary housing requirements on entitled or built projects. The <br />current version of the HOO retroactively applies to projects that were entitled under different <br />sets of circumstances and conceived under very specific economic assumptions when they <br />were entitled. The retroactive application of inclusionary housing requirements drastically <br />changes the economics of the projects from the assumptions that supported the originally <br />approved projects. An existing project that was entitled or built under a set of economic <br />assumptions may become economically unviable once the inclusionary requirement has been <br />added to its costs. <br />Viable Alternatives for On -site Production of Inclusionary Affordable Housing Units — <br />The current ordinance does not really allow off site production of affordable units as a means <br />to meet the inclusionary affordable housing standard. Instead, in practice, it allows the <br />developer to negotiate lower in -lieu fees for up to 100% of the inclusionary requirement. This <br />particular item works as an impediment to the intent of the Housing Opportunities Ordinance <br />in two ways: 1) It removes the consistency and predictability that can assure applicants of <br />the actual cost of their development when formulating their application, and 2) By allowing up <br />to 100 % of the inclusionary requirement to be fulfilled through a negotiated in -lieu fee, it <br />lessens or eliminates the opportunity to produce affordable housing units at no cost to the <br />public in conjunction with production of new market rate housing. <br />y 1 1 I <br />