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FINANCIAL STATEMENT There is no fiscal impact as a result of the direction City Council provides at this meeting. Implementation of policies and programs in the future may require allocation of funds. BACKGROUND The Housing Element is part of the City's General Plan and is a comprehensive statement by the community of its current and future housing needs and proposed actions to facilitate the provision of housing to meet those needs at all income levels. Periodic updates of the Housing Element are required by state law. The City's current Housing Element, which was adopted in 2015, covers the 5th Cycle planning period from 2015 to 2022. The Draft Housing Element currently under review covers the 6th Cycle planning period from 2023-2031. RHNA Process A key component of the Housing Element is the RHNA, which is a planning target representing the City's "fair share" of the regional housing need, as determined by HCD and the regional Council of Government (in the Bay Area, ABAG. The City's RHNA is established at 5,965 units — this number was assigned to the City based on a methodology developed by ABAG in consultation with various stakeholders, through a multi -month process in 2020 and 2021. The City engaged closely throughout the RHNA process, including monitoring the methodology's development, and submitting an appeal of the Draft RHNA to ABAG. More broadly, statewide the 6th Cycle RHNA process has been closely scrutinized and critiqued, leading to a recent audit and report by the State which raised several criticisms of HCD's technical process and made several recommendations for improvements to be undertaken by HCD going forward. Despite these criticisms, the Audit Report did not call for modification of any of the regional or local RHNA allocations, and therefore the City's Draft Housing Element continues to use the 5,965 -unit target assigned by ABAG. Certification by the State HCD reviews each housing element prepared by individual jurisdictions across the State and determines its compliance with State law. If HCD issues a finding that the Housing Element is in substantial compliance with State law, it is referred to as "certification" of the Housing Element. At the direction of the City Council, the City submitted its draft Housing Element for review by HCD on August 16, 2022. HCD completed its review and provided a comment letter to the City on November 14, 2022. HCD's comment letter is included as Attachment 1. An updated Housing Element responding to HCD's comments will need to be resubmitted to HCD for final certification. It will be submitted upon adoption of the document by the City Council, anticipated by the end of January 2023. Timeline and Public Consultation The City formally initiated the Housing Element update process in March 2021 with hearings beginning in May 2021. At each step of the process, the City has engaged the community through social media, the local press, utility bill mailing, website development, an online survey, and other methods. There have been over 40 public Page 2 of 21