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7 of 11 1. Clustering and dispersal of units (17.44.050.A) The existing IZO requires units to be dispersed , however the proposed revisions set a maximum proportion of units that may be located adjacent to one another or within a single building on the site. The revisions also provide some additional but limited exceptions to permit clustering of units. For example, within single-family detached developments, the IZO would have provisions to allow attached units such as duets or townhomes; or, where a project is able to use Lower Income Housing Tax Credits (LIHTC) to achieve a multi-family project that would satisfy its inclusionary requirements, for those units to be clustered, as a practical matter. The purpose of these changes is to provide additional flexibility and improve the likelihood that units will be built on-site. Particularly for single-family residential projects, building and deed-restricting exactly the same unit type as the market-rate units may not be feasible. For example, deed-restricting a large, detached, single-family residence to below-market-rate prices may reflect a subsidy in the sales price, amounting to several hundred thousand dollars per unit. Allowing a developer the ability to deed-restrict, for example, a smaller, attached unit (e.g., a duet or duplex building) greatly increases the financial feasibility of a project and the ability to deliver on-site affordable units. The City has seen and accepted this approach in numerous projects over the years, most recently in the Merritt project. Other exceptions to the clustering/dispersal requirements may be approved by City Council, through an “alternative compliance” approval (see below) and subject to specific findings. 2. ADUs and JADUs disallowed from counting towards inclusionary requirements (17.44.050.B) The revised IZO explicitly states that ADUs and JADUs may not count towards the IZO. This new requirement is staff’s recommendation based on the fact that legally (pursuant to the Ellis Act) the City cannot require a homeowner to rent an ADU (at all), and even if rented, there are significant practical challenges to monitoring and ensuring the unit is rented to a n income-qualified household. This provision is not intended to construe that the City does not support or encourage ADUs in general, which could still be used to provide an increment of housing above and beyond the IZO that is “affordable by design.” The Council unanimously supported not allowing JADUs to count towards meeting the IZO, but requested additional analysis regarding ADUs, which will be provided when the City Council considers the draft ordinance. Staff continues to strongly recommend against allowing for ADUs to be used to satisfy the IZO requirements for the above-stated reasons and lack of certainty that the unit will actually provide the affordable housing opportunity intended to be secured by the IZO. 3. Unit Size As noted, the existing IZO allows for the inclusionary units to be smaller than the market-rate units but provides no minimum size. The proposed amendments allow for: • For-sale inclusionary units living area to be up to 50 percent of the size of the average of the market-rate units;