The purpose of this article is to implement a general plan policy to require developments with twenty-six or more residential units for purchase to provide units that are affordable to middle income households.
The city council hereby finds as follows.
(a) 
The State of California Government Code Sections 65580 and 65589.5 state the following findings and goals for housing:
(1) 
The availability of decent housing and a suitable living environment for every Californian is a vital statewide goal. The attainment of this goal requires efforts to accommodate the housing needs of Californians of all economic levels.
(2) 
Local governments have a responsibility to use the powers vested in them to provide for the housing needs of all economic segments of the community considering economic, environmental, and fiscal factors and community goals set forth in the general plan. Each locality is best capable of determining what efforts are required by it to contribute to the attainment of the state housing goal.
(3) 
California housing has become the most expensive in the nation. Among the consequences are discrimination against low income and minority households, lack of housing to support employment growth, imbalance in jobs and housing, reduced mobility, urban sprawl, excessive commuting, and air quality deterioration.
(4) 
The premature and unnecessary development of agricultural lands for urban uses continues to have adverse effects on the availability of those lands for food and fiber production and on the economy of the state. It is the policy of the state that development should be guided away from prime agricultural lands and that jurisdictions should encourage in-filling existing urban areas to the maximum extent practicable.
(b) 
The establishment of a middle income housing ordinance by the City of Davis is consistent with the state legislature's housing goals and intent in that:
(1) 
The City of Davis is interested in providing housing that is affordable to its local workforce as well as other underserved households. A study of middle income housing needs, impacts, and options completed for the City of Davis found that the Davis housing market is not providing adequate ownership housing opportunities for middle income households. Middle income households cannot afford to purchase even the least expensive market rate housing being developed and cannot qualify for affordable housing units provided for low and moderate income households.
(2) 
The City of Davis is using its vested powers to provide for the housing needs for all economic segments of the community and the local workforce in particular.
(3) 
Public funds for the construction of middle income housing units are not available.
(4) 
The city council has considered the community goals set forth in the general plan and the economic factors related to a middle income housing requirement, including impact on development feasibility. The study of middle income housing needs, impacts and options found that the requirement for middle income units would involve reduced opportunity profits for the housing developer but would not require a construction subsidy.
(5) 
The city council has considered the potential environmental effects from the middle income ordinance project and finds that the project would not have a significant effect on the environment or a cumulatively considerable environmental effect in that the project. The project will not affect the amounts or allowable densities of residential development in the general plan. The project would have cumulatively beneficial effect by providing housing opportunities for the local workforce. Workforce housing would reduce traffic congestion and air pollution by Davis workers who otherwise would live outside Davis and commute longer distances to work. city council approves Negative Declaration No. 03-05 for this project.
(6) 
The city council finds that the middle income housing requirement project would not discriminate against protected classes including minorities, disabled, elderly and families with children. The effect of the project would be to divert housing production that most likely would have been affordable to higher income households and instead require developers to restrict the sales of those housing units to households qualifying as "middle income." Discrimination based on income is acceptable when it serves a public purpose such as facilitating the ability of households to afford decent, safe, and sanitary housing that otherwise could not. The data in a study of middle income housing needs, impacts and options shows that:
(A) 
Shifting some of the housing supply from the above middle income level to middle income level through a middle income inclusionary requirement would most likely not have a significant impact on non-white households, households with disabled persons, and households with children because there are more households of these categories in the middle income level than the above-middle level in Davis, Yolo County, and the Sacramento/Yolo CMSA; and
(B) 
There is a slightly higher concentration of elderly households in the one hundred thousand dollars and above income categories than in the sixty thousand to ninety-nine thousand dollars income range which closely resembles the "middle" income range. This could mean that if the city implements a program to require middle income units, there would be a lower proportion of elderly households who would qualify for the housing versus the proportion of elderly households in the higher income categories who would be able to afford more expensive housing. The higher income elderly households, however, would generally be able to find decent housing compared to lower income households.
(7) 
The projects will not change the city's existing housing programs and requirements for very low, low and moderate income households.
(8) 
The project will provide greater housing opportunities for middle income households as the Davis housing market has not been providing adequate ownership housing opportunities for middle income households.
(9) 
The City of Davis is attempting to provide middle income housing to support the community's growth in employment by providing employee housing, retain a balance of jobs and housing, provide mobility, and preserve air quality. The City of Davis is attempting to avoid urban sprawl and excessive commuting.
(10) 
The City of Davis is attempting to balance housing programs with agricultural land preservation programs which purchase conservation easements, including mitigation requirements for the conversation of agricultural land by urban development.
(c) 
The establishment of a middle income housing ordinance by the City of Davis is consistent with the city's general plan policies which call for a mix of housing types that meet a variety of needs. These policies include:
(1) 
Policy LU A.2. Require a mix of housing types, densities, prices and rents, and designs in each new development area.
(2) 
Policy Housing 1.1. Encourage a variety of housing types that meet the housing needs of an economically and socially diverse Davis.
(3) 
Policy Housing 4.2. Provide affordable housing opportunities for the local workforce in the Davis area.
(4) 
Standard Housing 4.2a. A development with twenty-six or more residential units for purchase shall provide units which are affordable to middle income households. Middle income households consist of households earning a gross income of no greater than one hundred eighty percent of the median income for Yolo County adjusted for household size. The number of middle income units shall be equivalent to ten percent for projects totaling twenty-six to thirty-five ownership units, fifteen percent for projects totaling thirty to forty-nine ownership units, and twenty percent for projects totaling fifty or more ownership units.
(5) 
Standard Housing 4.2b. Units built under the middle income requirement shall be made affordable to households with gross incomes of one hundred twenty percent to one hundred eighty percent of the median income for Yolo County, with an average affordability for households at one hundred forty percent of the median income for Yolo County.
(6) 
Policy Housing 4.3. Promote a linkage between new ownership housing and the local workforce.
(7) 
Action Housing 4.3a. Implement an incentive system for the local workforce, such as a lottery, as part of the city's buyer selection process for low/moderate income and middle income affordable ownership units. The system shall provide the highest number of lottery tickets to households with a member of the local workforce.
(d) 
The public purposes served by providing housing opportunities for middle income households and the local workforce include:
(1) 
Helping the city and school district better serve the public with vital services;
(2) 
Helping businesses by facilitating greater employee productivity and morale;
(3) 
Enhancing recruitment and retention efforts, and increasing service levels;
(4) 
Reducing traffic congestion and air pollution by people who otherwise would live outside of Davis and commute longer distances to work;
(5) 
Improving the quality of life for Davis employees by bringing them closer to their place of work.
(Ord. 2234, 2006)
For the purposes of this article, the following words and phrases shall have the meanings respectively ascribed to them by this section:
Density bonus
means entitlement to build additional residential units above the maximum number of units permitted pursuant to existing general plan, applicable specific plan, and zoning designations. Density bonus units are granted and may be constructed only in developments where units of affordable housing built under the city's low-moderate income ordinance are located.
Developer
means the owner of record and his or her successors in interest.
Development
means one or more projects or groups of projects that include residential units constructed in a contiguous area. A development need not be limited to an area within an individual parcel, or subdivision plat.
Exempt condominiums
are residential ownership units in a condominium development that is predominantly composed of stacked air space units not having separate ownership parcels. Townhouse or single family developments are not considered "exempt condominiums" under this definition, even if they are structured as condominium units.
Family
means an individual or group of two or more persons occupying a dwelling unit and living together as a single housekeeping unit in which each resident has access to all parts of the dwelling and where the adult residents share expenses for food or housing.
Feasible
means capable of being financed, demonstrating the required financing (if any) meets lenders investment standards with respect to the project's loan to value (LTV), debt coverage ratio (DCR), and return on asset (ROA), based on the prevailing interest and discount rates supported in the required appraisal for a like property. Feasible projects should be sustainable projects, taking into account the cost of construction and ongoing maintenance of the project, in addition to the site's essential services.
Household
means "family" as defined in this section. This definition shall not apply to households in which any member is claimed as a dependent for federal income tax purposes by a person or persons residing outside of the household unit unless such person or persons who reside outside the household qualify as very low, low, moderate or middle income persons or families.
Middle income
means a household earning a gross income of no greater than one hundred eighty percent of the median income for Yolo County, adjusted for household size, as determined by the U.S. Department of Housing and Urban Development and affirmed by the Davis city council annually.
Middle income ownership units
are ownership housing units at prices affordable to middle income households based on the requirements of this article.
Middle target income
means that the average pricing of middle income units will be affordable to households at one hundred forty percent of median income for Yolo County, adjusted for household size, as determined by the U.S. Department of Housing and Urban Development and affirmed by the Davis city council annually.
Moderate income
means a household earning a gross income of no greater than one hundred twenty percent of the median income for Yolo County, adjusted for household size, as determined by the U.S. Department of Housing and Urban Development and affirmed by the Davis city council annually.
Ownership units
means housing units that can be sold individually and function on their own utilities, while providing an ownership opportunity. Ownership units would include, but are not limited to, single-family units, condominiums, and land trusts, except in circumstances where the unit is converted to rental use.
Target income levels
means the income levels required to be served by middle income units produced under this ordinance, based on the set standards for median income levels within Yolo County annually derived from the U.S. Department of Housing and Urban Development, adjusted for household size.
(Ord. 2234, 2006)
This article is enacted pursuant to the general police power of the city and is for the purpose of providing middle income housing in Davis consistent with the general plan. This article shall apply to all projects consisting of newly constructed ownership units totaling twenty-six units or greater.
(Ord. 2234, 2006)
(a) 
Middle income housing plan. The developer shall submit, concurrently with or prior to the submission of an application for the first discretionary approval for a project, an application as provided by the city describing the proposed middle income housing plan, in accordance with this article, as well as the affordable housing plan required by the city's low-moderate affordable housing ordinance, that includes the intended method for implementing the project's middle income and affordable housing requirements. A developer may submit an application under this article at any time subject to the planning commission or city council's discretion to deny the application on the sole basis of lack of timeliness. Any application resubmitted by a developer to amend a middle income housing plan after it has been approved by the city shall be deemed a new application for the project. Before any final agreements between parties or transfer of land is made, the project's middle income housing plan shall be approved with other required development entitlements such as general plan amendment or zoning approvals. The middle income housing plan shall adhere to the requirements of this article and affordable housing plan shall adhere to the requirements of the low-moderate affordable housing ordinance. Both shall meet the housing needs of the city and its residents. No contracts shall inhibit the city's ability to make changes to any middle income housing plan in order to improve the plan and its provision of middle income housing units.
(b) 
Approval process of middle income housing plans. The approval process for middle income housing plans will include the following steps:
(1) 
Submission of the middle income housing plan as part of the project application submitted to the community development and sustainability department. Staff shall then refer the middle income housing plan to the social services commission.
(2) 
The social services commission will hold a duly noticed public hearing, where the plan shall be considered. The commission will review the plan for compatibility with this article, adopted city affordable housing goals, and current city housing needs.
(3) 
After a recommendation is given by the social services commission regarding the proposed middle income housing plan, it is then heard at a public hearing before the planning commission. If the project is requesting planning approvals that do not require a city council hearing, then the planning commission's decision is final, but can be appealed to the city council.
(4) 
If the project is requesting planning approvals that require a city council hearing, the recommendations of both the social services commission and the planning commission shall be included in the report to the city council.
(c) 
Building permit issuance. No building permit shall be issued for any new residential ownership unit unless such construction has been approved in accordance with the standards and procedures provided for by this article. The location and type of proposed middle income housing in a development shall be disclosed in writing by each seller to each subsequent purchaser of lots or units within the development, until all of the middle income housing units are completed.
(d) 
Rounding provisions. Where the total middle income units required by this article call for a one-half middle income unit or greater portion, it shall require the provision of one full middle income unit (for example, a requirement of one and one-half shall actually require two units).
(e) 
Buyer selection and screening. Buyer selection and screening shall be carried out by the developer, owner, city, or by the designated responsible party, at the sole expense of the developer. Included in the middle income housing plan submitted by the developer, shall be a proposed marketing plan with an estimated timeline of events, which must be approved by the city and shall adhere to the City of Davis buyer/tenant selection and screening guidelines.
The City of Davis will monitor the buyer selection and screening process through required monthly reports, and through the ability to review any and all files regarding the process at any time that city staff requests to do so.
The City of Davis will possess the ability to halt any sale of a middle income unit at its discretion, for reasons to include, but not restricted to, the following: if the buyer selection and screening process was not strictly adhered to, or if the buying household is found not to meet the guidelines of qualification, as specified in the guidelines.
(Ord. 2234, 2006)
A developer of a residential ownership development consisting of twenty-six or greater units shall provide, to the extent feasible, units offered to middle income households as required in this section. All required middle income units must be constructed on-site and sold as middle income ownership units, as described in this section. Ownership projects consisting of fewer than twenty-six units are not required to provide middle income units.
The required middle income housing units shall be constructed on the development project site in compliance with the requirements in this section and the process requirements in Section 18.06.040. The project's middle income housing plan shall comply with these requirements.
(a) 
Project percentage requirements. To the maximum extent feasible, each developer must meet the middle income housing requirement as it pertains to the project, as set forth below:
(1) 
Projects With Fewer Than Twenty-Six Units for Purchase. No middle income affordability requirements.
(2) 
Projects Totaling Twenty-Six to Thirty-Five Units for Purchase. A number equivalent to ten percent of the project's total ownership units being developed, including market rate units, low-moderate affordable units, and any density bonus units resulting from the low-moderate affordability requirement, must be developed as middle income units, as directed in this section.
(3) 
Projects Totaling Thirty-Six to Forty-Nine Units for Purchase. A number equivalent to fifteen percent of the project's total ownership units being developed, including market rate units, low-moderate affordable units, and any density bonus units resulting from the low-moderate affordability requirement, must be developed as middle income units, as directed in this section.
(4) 
Projects Totaling Fifty Units or Greater Units for Purchase. A number equivalent to twenty percent of the project's total ownership units being developed, including market rate units, low-moderate affordable units, and any density bonus units resulting from the low-moderate affordability requirement, must be developed as middle income units, as directed in this section.
(5) 
Projects With Exempt Condominiums. A development project with seventy-five percent or more of its total residential units proposed to be "exempt condominiums" (as defined in Section 18.06.020) shall be exempt from the project percentage requirements in this section. The intent of this exemption is to encourage the construction of such projects because of their contributions to the community in terms of infill development, the production of housing options, and inherent housing affordability.
(b) 
Density bonus. No density bonus shall be awarded for the construction of middle income units.
(c) 
Unit types. The developer must provide a mix of two and three bedroom units, with a minimum of fifty-percent of the units as three bedroom units and in a combination of unit types as approved within the Middle Income Housing Plan through the appropriate review process. Smaller and larger unit sizes may be provided as an option, based on local housing needs and project character, as approved during the middle income housing plan review process.
Middle income units shall reflect differences from low-moderate income units to reflect the different prices. Such differences may include the size of the house and garage, features, materials, and interior finish. The differences shall be described as part of the middle income housing plan and made part of the design review plans for the housing units.
(d) 
Unit prices. Middle income units shall be affordable to middle income households with incomes equal to or less than one hundred eighty percent of Yolo County area median income (AMI), adjusted for household size. The middle target income shall be households with incomes at one hundred forty percent of AMI, adjusted for household size.
Middle income units shall be provided with a range of prices that are affordable to households with incomes between one hundred twenty and one hundred eighty percent of AMI. Prices shall be distributed in affordability among the following income brackets: (1) up to one hundred forty percent of AMI; (2) over one hundred forty and up to one hundred sixty percent of AMI; and (3) over one hundred sixty and up to one hundred eighty percent of AMI. A range of prices is required but the average price shall be affordable to a household with an income at one hundred forty percent of AMI.
The prices of middle income housing shall be based on the following percentages of targeted gross household income applied to housing expenses: no more than thirty-five percent of household income shall be used for units priced for household incomes up to one hundred forty percent AMI; no more than thirty-seven and one-half percent of household income shall be used for units priced for household incomes over one hundred forty and up to one hundred sixty percent of AMI; and no more than forty percent of household income shall be used for units priced for household incomes over one hundred sixty and up to one hundred eighty percent of AMI. Household expenses shall include mortgage principal and interest, taxes, insurance, assessments, and homeowner association fees, as applicable. Percentages allowed for the qualifying of the mortgage loan shall be determined by the lender or lenders chosen by the income-qualified household.
The housing programs manager shall determine the maximum sales price for these units on an annual basis. The housing programs manager shall propose annual adjustments to the maximum purchase prices based on changes in the area median income, as determined by the U.S. Department of Housing and Urban Development. These prices shall be reviewed annually for adoption by the city council.
(e) 
Incentive system. The middle income housing units created by this article shall be subject to Article 18.07, Incentive System for the Local Workforce.
(f) 
Co-signers not permitted. No co-signers shall be permitted in the sale of middle income ownership units in order to ensure that households within the target income group are served by the middle income units that this article produces.
(g) 
Owner-occupancy restrictions. All person(s) who purchase and own a designated middle income unit pursuant to this article shall occupy that unit as his or her/their principal personal residence for as long as he or she/they own(s) the middle income unit. Such occupancy shall commence within no greater than six months following completion of the purchase. All purchases and occupancy of the unit shall comply with the provisions of Article 18.04, Owner Occupancy.
(h) 
Long-term affordability. In order to retain units built under the city's middle income housing requirement as below-market units into the future, one of the following restrictions shall be adhered to:
(1) 
Appreciation Capped at Five Percent per Year. The middle income unit is restricted to appreciate at a maximum of five percent each year, compounded annually. This amount is based on the average increase in Yolo County area median income of three percent, a three-quarters percent credit for maintenance costs of the unit, and an additional equity return of one and one quarter percent to the owner of the middle income unit.
(2) 
Alternative Proposal. Any other program that proves its ability to provide for long-term affordability, as approved by the social services commission, planning commission, and city council, as required by the individual project's planning entitlements. Proposing an alternative method for long-term affordability must be justified based on current market trends and/or other prevailing circumstances.
(i) 
Right of first refusal. All middle income ownership units shall deed to the City of Davis a permanent right of first refusal on the property, allowing the city the ability to either purchase the unit, or designate an appropriate buyer for the unit at its resale or transfer. The deed restriction shall allow the city to designate a third party to carry out its right of first refusal, and shall also allow for a one percent administrative fee to be taken from the real estate transaction in order for the city to pay for the costs of carrying out the right of first refusal.
(j) 
Resale report. The owners of all middle income ownership units shall be required to clear all city resale reports completed on these units prior to the close of escrow on the resale of each unit. The findings of the city resale inspection that are required to be addressed cannot be transferred to the household purchasing the middle income unit unless the costs of reconciling those items are taken out of the maximum sales price and accepted by the buyer.
(Ord. 2234, 2006)
(a) 
The developer may meet the city's middle income housing requirement with a project individualized program that is determined to generate an amount of affordability equal to or greater than the amount that would be generated under the standard middle income affordability requirements. The middle income housing units must, at a minimum, meet the same income targets specified in the standard middle income housing requirements.
(1) 
A project individualized program shall be developed by the developer and city staff, taken action on by the social services commission, and if the main project application requires, heard before the planning commission for decision.
(2) 
If the main project is requesting planning entitlements that require city council approval, it shall then be heard before the city council for final decision.
(3) 
If the main project does not require a city council hearing, the planning commission's or the social services commission's determination may be appealed to the city council by any member of the public.
(b) 
The project individualized program is intended to be reviewed thoroughly and scrutinized in public forums, allowing for input from the public, other developers, staff, and at a minimum, the social services commission. The public hearing at the social services commission shall be noticed widely. This public hearing shall scrutinize the project based on the following criteria:
(1) 
Long-term affordability of the middle income units;
(2) 
Community need of the project type based on recent needs assessments and recent projects completed;
(3) 
Uniqueness/innovation of the proposed project;
(4) 
Overall benefits and drawbacks of the project;
(5) 
Project's compliance with the standard middle income housing requirements.
These meetings shall be carried out without any finite contracts in place between the parties involved, allowing for the potential direction to the developer to make changes to the project. If the Social Services Commission finds that the proposed project does not satisfy one or all of the criteria listed above, it may choose to direct the developer to fulfill his or her middle income housing requirement based on the standard requirements of Section 18.06.050 of this Code.
(Ord. 2234, 2006)
The city council may, by resolution, establish fees and deposits for processing of applications as required by this article.
(Ord. 1651 § 3; Ord. 2234, 2006)
Residential projects consisting of fewer than twenty-six units are not required to produce middle income units.
The requirements of this article may be adjusted or waived if the developer demonstrates to the satisfaction of the city council that there is not a reasonable relationship between the impact of a proposed residential project and the requirements of this article, or that applying the requirement of this article would take property in violation of the United States or California Constitutions.
(a) 
Proposed middle income housing plan. In order for an exemption or modification to be considered by city council prior to construction, the developer must request such exemption/modification with the first application for approval of the residential project and the middle income housing plan. The matter shall be considered before the city council at a public hearing. In making the finding or determination, the city council may consider the following:
(1) 
The developer is subject to the inclusionary housing requirements in this article.
(2) 
The council is able to provide incentives.
(3) 
The developer may build the most economical middle income housing product in terms of construction, design, location, and tenure. For the purposes of a taking determination, the developer has the burden to provide economic and financial documentation and other evidence necessary to prove that the application of this article would constitute a taking of the property without just compensation.
If it is determined that the application of the provisions in this article would constitute a taking or that there is not a reasonable relationship between the impact of the proposed project and the requirements of the article, the inclusionary requirements for the residential project shall be modified to reduce the inclusionary housing obligations to the extent and only to the extent necessary to avoid a taking or unreasonable relationship. If it is determined that no taking would occur by application of this article, the requirements of the article remain applicable and no approvals for the residential project shall be issued unless the developer has executed a middle income housing plan pursuant to the requirements of this article and approved by city council.
(b) 
Approved middle income housing plan. Should the developer seek an exemption or modification after a middle income housing plan is approved (such as during construction or after construction of the project), the developer must request an exemption/modification to the approved middle income housing plan. The matter shall be considered before the city council in the same manner as an exemption/modification for a proposed middle income housing plan. The developer shall have the additional burden of demonstrating how conditions have changed since the approval of the middle income housing plan that justifies the exemption/modification. The developer must demonstrate to the satisfaction of the city council that the middle income units cannot be sold subject to the provisions of the middle income housing plan and that specific exemptions or modifications are needed.
(Ord. 2234, 2006)