Discussion about changing the zoning code to allow required commercial areas of mixed-use developments that are vacant to be converted to dwelling units in exchange for permanent, affordable housing

Discussion and possible direction

In November 2011, the City Council adopted the Zoning Code regulations that incentivize the mixed-use land use by allowing unlimited residential density with commercial areas as part of mixed-use development. The commercial areas of a few of these developments where the property owners have exercised the incentive remain unoccupied. To allow the required commercial areas to be utilized for residential purposes, such as to convert the area into residential dwelling units in exchange for permanent, affordable housing (hereafter referred to as the “Concept”), would require an amendment to the Zoning Code.
 
In order to understand the potential land use impacts of implementing the Concept and to provide the City Council with sufficient information, a thorough analysis is recommended to evaluate the implications of the Concept. Depending on the method that is intended to implement the Concept and the information obtained through the analysis, it may be determined that a Major Plan Amendment to the Regional Plan or an amendment to the Specific Plans is necessary to modify the existing goals and policies or incorporate new ones. If an amendment to the Regional Plan or a Specific Plan is needed, it will need to be completed prior to the associated amendment to the Zoning Code

In November 2011, the City Council adopted the current Zoning Code regulations pertaining to the mixed-use land use for properties with commercial-zone designations. Moreover, mixed-use land use was incorporated into some of the transect zones. To incentivize this use, the Zoning Code regulations allow unlimited residential density with commercial areas as part of mixed-use development. This incentive is intended to assist in implementing the Regional Plan’s goals and policies to achieve a balanced and diverse mix of land uses (commercial, employment, institutional and residential) that are within close proximity to each other.¹  Furthermore, the regulations are intended to incentivize the reinvestment and infill development of under-utilized and vacant parcels and the reuse of vacant commercial buildings.²

Several developments have utilized the mixed-use incentives to achieve considerably greater densities than those typically allowed for a multiple-family development in the non-transect and transect zones. These Mixed-use High Occupancy Housing Developments (MHOHD) include the following:

• Aspen Place: 71 dwelling units per acre
• Fremont Station: 38 dwelling units per acre
• The Hub³ (The Jack): 87 dwelling units per acre
• The Standard: 52 dwelling units per acre
• Uncommon: 87 dwelling units per acre

Without using the applicable transect zones (the Hub) or incorporating residential dwellings with the commercial area as part of a commercial zone mixed-use development, each development listed above would have been limited to 29 dwelling units per acre with the issuance of a Conditional Use Permit for a Planned Residential Development. 

The Aspen Place has had its commercial area successfully occupied, and the Uncommon is under construction. The three remaining developments (Fremont Station, The Hub and The Standard) have never had their associated commercial space occupied. If a property owner of one of the three referenced developments desires to convert the vacant commercial area into residential dwellings, irrespective of affordability, the Zoning Code does not allow it. Only one property owner (The Standard) has contacted staff to query whether they can convert their commercial area into residential dwellings.

To allow the Concept, an amendment to the Zoning Code is required. It should be noted that an amendment to implement the Concept would need to be uniformly applied and cannot be restricted to the existing developments. Therefore, it will need to be available to new developments. Without the required commercial area, the above-referenced developments would be considered High Occupancy Housing Developments (HOHD).

The Regional Plan supports increased densities within activity centers and adjacent to corridors streets, including a variety of housing types.⁴ The proposed Concept can serve as a way to alleviate and utilize the vacant commercial areas of mixed-use developments and further implement the Regional Plan’s and the Incentive Policy for Affordable Housing’s policies and objectives. However, other Regional Plan policies need to be considered as well.⁵ Specifically, the Regional Plan’s goals and policies that encourage residential uses to be located above and behind commercial uses in mixed-use developments and adjacent to corridor streets.⁶ Each of the above-referenced developments are adjacent to commercial corridor streets.

Please be advised that multiple-family developments with densities of 29 dwelling units per acre and less are currently allowed on commercial-zoned properties adjacent to corridor streets with the issuance of a Conditional Use Permit and adherence to the Planned Residential Development standards, but HOHD developments are not.  This allowance is a remanent of the 2011 zoning code that was adopted prior to the adoption of the Regional Plan, and there is not a requirement to locate residential uses above and behind commercial uses in these developments.

If the City Council seeks to amend the Zoning Code to implement the Concept, there are several questions and considerations that need to be evaluated. A few of the major considerations include the following:

• What is the appropriate quantity and diversity of affordable housing necessary to offset the unlimited density that mixed-use developments are allowed?
• What are the impacts on the Regional Plan’s and Specific Plan’s goals and policies of allowing HOHDs on commercially zoned properties adjacent to commercial corridor streets?
• Will the allowance of HOHDs adjacent to vital commercial corridors streets (Milton Road, Route 66, Butler Avenue, Fourth Street, etc.) perpetuate converting prime commercially zoned property to residential-only uses?
• What are the immediate and long-term effects of achieving a mix of land uses that maintains the commercial zones’ integrity and viability to achieve other land use planning goals, policies and objectives intended to ensure the economic prosperity of the existing commercial areas and promote new commercial investment?

To answer these questions and provide a thorough analysis for the City Council to consider, a much broader land use, market and real estate analysis are recommended to understand the potential impacts of implementing the Concept. The approximate cost of the analysis would be between $40,000–60,000. This cost estimate is contingent upon the study’s information and depth.

Depending on the method used and an analysis of the above questions, the Concept’s implementation may negatively affect the Regional Plan’s fundamental basis of the corridor and activity center goals and policies. It is possible that upon review of the associated impacts, a Major Plan Amendment to the Regional Plan or an amendment to the Specific Plans may be necessary to modify the existing goals and policies or incorporate new ones. If an amendment to the Regional Plan or a Specific Plan is needed, it will need to be completed prior to the associated amendment to the Zoning Code.

The above-referenced analysis expense is in addition to the cost to amend the Zoning Code and the Regional Plan. The amount to comply with the minimum code requirements to amend the Zoning Code is anticipated to be between $1,500 and $3,500. If a Regional Plan amendment is required, the anticipated cost is between $4,000 and $6,000. The Zoning Code and Regional Plan cost estimates assume that no other items are being amended with the process.

The above-referenced land use, market, and real estate analysis is typically beneficial as part of the Regional Plan adoption process, which is anticipated to begin in 2022. Furthermore, the analysis would be valuable to assist with additional amendments to the Zoning Code that are necessary to implement the Regional Plan goals and policies related to incorporating low-impact employment uses in zones that contain activity centers and Downtown.⁷ Additionally, the information would be beneficial to the Economic Vitality staff so that they may better understand, market, and adjust for the utilization of the commercial zones in the current and future land use and economic conditions.

Notes:

1. The applicable Regional Plan goals and policies include the Regional Plan Policy (RPP) LU.1.7., RPP LU.5.5., Regional Plan Goal (RPG) LU.6., RPP LU.6.3., RPP LU.18.2., RPP LU.18.7. and RPP LU.18.13.
2. The applicable Regional Plan goals and policies include the RPP LU.1.3., RPP LU.1.7., RPP LU.10.5. and RPP NH.3.4.
3. The Hub (The Jack) is zoned T4 Neighborhood 1 (T4N.1) and T5 Main Street (T5). The total property size and dwelling units are utilized in density calculations.
4. The applicable Regional Plan policy is RPP LU.10.6
5. The applicable Regional Plan policy is RPP NH.3.5.
6. The applicable Regional Plan policies include the RPP LU.10.6., RPP LU.13.5. and RPP LU.18.12.
7. The applicable Regional Plan policies include the RPP LU.6.2., RPP LU.13.7. and RPG LU.18.