Here is feedback on Capitola's 7th draft Housing Element submitted to you on April 30, 2024 and revised on June 20, 2024
Key points include:
* Capitola's buffer for low income is now only 2% as the number of low-income homes in the Mall project has significantly dropped.
* Capitola relies on nonvacant sites for most of their RHNA and >50% of Lower income RHNA. Their analysis on realistic development potential and existing uses impeding development is incomplete. It covers only a fraction of sites. Further, modified development constraints apply only to the Mall, so it is lessens the potential that other parcels needed for Lower income RHNA will be developed.
* Capitola has not addressed HCD's comment about evaluating the impact of their Incentives for Community Benefit on housing supply and cost.
Lower Income Buffer is now only 2%
This draft reflects changes in the Capitola Mall, after Capitola's discussions with Merlone Geier, who owns several of the parcels. This draft increases the total units (from 627 to 1777) for the Capitola Mall redevelopment. However, Merlone Geier has committed only to the required inclusionary rate of 15% so even with more than doubling the total units, the number of lower income homes at the Mall has dropped to 266 (down from 388). Capitola used to allocate over 60% of the low and moderate RHNA to the Mall, now it is approximately 40%.
Capitola has modified the Low Income count on other sites in the inventory in an effort to make up this significant difference. Even after moving the entire unit counts on other sites to Low Income and accounting for ADUs, their residential Low Income buffer has plummeted. In Table 4-8, the lower income surplus is only 2% (+14 for a RHNA of 712).
Non-Vacant Sites, including >50% for Lower Income
Capitola relies on non-vacant sites for most of their RHNA and on nonvacant sites for >50% of their Lower income RHNA. Capitola has not adequately described the realistic potential for development of their nonvacant sites, and in particular, has not provided substantial evidence that the existing use will likely be discontinued during the planning period.
Capitola has added additional information on justification for use of non-vacant sites beginning on page 4-30, and in the site inventory table, including discontinued commercial use and expressed interest by property owners. These justify only half of the Low Income units in the RHNA.
HCD's Site Inventory Guidebook (pg 24) indicates that Capitola's analysis for non-vacant sites may also be based on "...the jurisdiction's past experience converting existing uses to higher density residential development, market trends and conditions, and regulatory or other incentives or standards that encourage additional housing development on the nonvacant sites.”
Capitola has little development history to trend.The few sites with actual densities over 20 du in Table 4-2 “Actual Residential Densities” were built many years ago.
Capitola is also not addressing constraints or adding incentives to encourage housing development. By limiting the increase in height to ONLY the Mall parcels, Capitola is not addressing the same (significant) constraint on other site parcels in the inventory. Their modification to Program 1.6 Development Regulations specifically ONLY indicates an increased height allowance on the Mall.
Impact of their Incentives for Community Benefit on housing supply and cost
HCD's letter of January 12, 2024 includes:
Other Locally Adopted Ordinances – Incentives for Community Benefit: While the element now discusses the discretionary process for incentives, it should still evaluate impacts on housing supply and cost. The analysis should particularly address the impacts on costs for providing community benefits and add or modify programs, as appropriate.
The one sentence added on Page 3-13 is not such an evaluation, nor does it address the impacts on costs for providing community benefits on top of costs for housing development. To date, this local ordinance has not incentivized development where it applies along 41st avenue. As a reminder, Capitola's last feasibility study [cityofcapitola.org] indicated that no rental development pencils out: “Even without any inclusionary requirements or in-lieu/impact fee obligations, rental development appears to fall somewhat short of industry-standard return thresholds.”