Public Review Draft Chapter 1

Carmel-by-the-Sea is a community with a high quality of life, a healthy environment, and renowned architecture. The long-term vitality of Carmel-by-the-Sea and the local economy depend upon the availability of various types of housing to satisfy the community’s local housing needs while continuing to be a vacation destination for all. As Carmel-by-the-Sea looks towards the future, increasing the range and diversity of housing options is integral to the City’s success. This Housing Element serves as a continuation of the City’s commitment to ensuring new opportunities for residential development, as well as preserving and enhancing existing neighborhoods.

Located on the Monterey Peninsula, Carmel-by-the-Sea is a bijou coastal community boasting sweeping views of the Pacific Ocean, acclaimed architecture, and a strong residential character. The City was incorporated in 1916, lending to its 1920-1930s architectural charm that is weaved throughout the City’s centralized business district and commercial district. The City has nearly 50 properties within the commercial district that are regarded as historical resources. As a result of its beauty, the City is a popular tourism and second-home destination. Approximately 51 percent of housing units are for seasonal, recreational, or occasional use, creating high barriers of entry to the housing market for locals.

This 2023-2031 Housing Element represents the City of Carmel-by-the-Sea’s intent to plan for the housing needs of the community while meeting the State's housing goals as set forth in Article 10.6 of the California Government Code. The California State Legislature has identified the attainment of a decent home and a suitable living environment for every Californian as the State's major housing goal. The Carmel-by-the-Sea 6th Cycle Housing Element represents a sincere and creative effort to meet State housing mandates within the constraints of a fully established built-out community, limited land availability, coastal hazards, and extraordinarily high costs of land and housing.

Pursuant to State law, the Housing Element must be updated periodically according to statutory deadlines. This 6th Cycle Housing Element covers the planning period 2023 through 2031 and replaces the City's 5th Cycle Housing Element that covered the period 2015 through 2023.

Per State Housing Element law, the document must be periodically updated to:

• Outline the community’s housing production objectives consistent with State and regional growth projections;
• Describe goals, policies and implementation strategies to achieve local housing objectives;
• Examine the local need for housing with a focus on special needs populations;
• Identify adequate sites for the production of housing serving various income levels;
• Analyze potential constraints to new housing production;
• Evaluate the Housing Element for consistency with other General Plan elements; and
• Evaluate Affirmatively Furthering Fair Housing.

The 6^th Cycle Housing Element update comes at a critical time because California is experiencing a housing crisis, and as is the case for all jurisdictions in California, Carmel-by-the-Sea is committed to playing its part in meeting the growing demand for housing. In the period 2020 through 2045, the AMBAG region is projected to add 36,544 jobs,[1] which represents a nine (9) percent increase. These changes will increase demand for housing across all income levels, and if the region can’t identify ways to significantly increase housing production, it risks worsening the burden for existing lower-income households, many of whom do not have the luxury or skill set to move to new a job center but that are nonetheless faced with unsustainable increases in housing cost.

If the region become less competitive in attracting workers and increasingly unaffordable to lower-income workers and seniors, then social and economic segregation will worsen, only exacerbating historic patterns of housing discrimination, racial bias, and segregation. This potentiality has become so acute in recent years that the California Legislature addressed the issue with new legislation in 2018. SB 686 requires all state and local agencies to explicitly address, combat, and relieve disparities resulting from past patterns of housing segregation to foster more inclusive communities. This is commonly referred to as Affirmative Furthering Fair Housing, or AFFH (more on this below).

Carmel-by-the-Sea has had moderate success in meeting its housing needs. In the last housing element cycle (2015 to 2022 – 2023 pending), for example, the City built 18 housing units, which represented 58 percent of its Regional Housing Needs Allocation (RHNA) of 31 new housing units. Of the units built, none were affordable to lower- and moderate-income households,[2] and 100 percent were affordable to above moderate-income households.

For the eight-year time frame covered by this Housing Element Update, the Department of Housing and Community Development (HCD) has identified the region’s housing need as 33,274 units. The total number of housing units assigned by HCD is separated into four income categories that cover housing types for all income levels, from very low-income households to market rate housing.^[1] This calculation is based on population projections produced by the California Department of Finance as well as adjustments that incorporate the region’s existing housing need. Per Government Code Section 65583(a), the Housing Element must also provide quantification and analysis of projected housing needs for extremely low-income households. The number of units for the extremely low-income level is not assigned by HCD, but is left for quantification by the local jurisdiction. This calculation is based on the HCD approved methodology[2], assuming that 50 percent of very low-income households qualify as extremely low-income households.

Almost all jurisdictions in the Monterey Bay Area received a larger RHNA this cycle compared to the last cycle, primarily due to changes in state law that led to a considerably higher Regional Housing Needs Determination (RHND) compared to previous cycles.

On November 8, 2022, AMBAG’s adopted RHNA Methodology, was approved by HCD. For Carmel-by-the-Sea, the RHNA to be planned for this cycle is 349 units, a substantial increase from the last cycle. Table 1-1 Regional Housing Needs Allocation shows the RHNA for Carmel-by-the-Sea for the period 2023 through 2031.

Table 1‑1 Regional Housing Needs Allocation

Income Group	Percentage of AMI	Share
Extremely Low Income[3]	<30	57
Very Low Income	<50	56
Low Income	51-80	74
Moderate Income	81-120	44
Above Moderate Income	121 +	118
Total		349

SOURCE: AMBAG

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[1] HCD divides the RHND into the following four income categories:

In 2018, Assembly Bill 686 (AB 686), signed in 2018, established an independent state mandate to affirmatively furthering fair housing (AFFH). AB 686 extends requirements for federal grantees and contractors to “affirmatively further fair housing,” including requirements in the federal Fair Housing Act, to public agencies in California. Affirmatively furthering fair housing is defined specifically as taking meaningful actions that, taken together, address significant disparities in housing needs and in access to opportunity by replacing segregated living patterns with truly integrated and balanced living patterns; transforming racially and ethnically concentrated areas of poverty into areas of opportunity; and fostering and maintaining compliance with civil rights and fair housing laws.

AB 686 requires public agencies to:

• Administer their programs and activities relating to housing and community development in a manner to affirmatively further fair housing;
• Not take any action that is materially inconsistent with the obligation to affirmatively further fair housing;
• Ensure that the program and actions to achieve the goals and objectives of the Housing Element affirmatively further fair housing; and
• Include an assessment of fair housing in the Housing Element.

The requirement to Affirmatively Further Fair Housing (AFFH) is derived from The Fair Housing Act of 1968, which prohibited discrimination concerning the sale, rental, and financing of housing based on race, color, religion, national origin, or sex—and was later amended to include familial status and disability. The 2015 U.S. Department of Housing and Urban Development (HUD) Rule to Affirmatively Further Fair Housing and California Assembly Bill 686 (2018) mandate that each jurisdiction takes meaningful action to address significant disparities in housing needs and access to opportunity. AB 686 requires that jurisdictions incorporate AFFH into their Housing Elements, which includes inclusive community participation, an assessment of fair housing, a site inventory reflective of AFFH, and the development of goals, policies, and programs to meaningfully address local fair housing issues.

An AFFH analysis was prepared and is included as an appendix to this housing element (see Appendix A).

Defining Segregation

Segregation is the separation of different demographic groups into different geographic locations or communities, meaning that groups are unevenly distributed across geographic space. This report examines two spatial forms of segregation: neighborhood level segregation within a local jurisdiction and city level segregation between jurisdictions in the Bay Area.

Neighborhood level segregation (within a jurisdiction, or intra-city): Segregation of race and income groups can occur from neighborhood to neighborhood within a city. For example, if a local jurisdiction has a population that is 20 percent Latinx, but some neighborhoods are 80 percent Latinx while others have nearly no Latinx residents, that jurisdiction would have segregated neighborhoods.

City level segregation (between jurisdictions in a region, or inter-city): Race and income divides also occur between jurisdictions in a region. A region could be very diverse with equal numbers of white, Asian, Black, and Latinx residents, but the region could also be highly segregated with each city comprised solely of one racial group.

There are many factors that have contributed to the generation and maintenance of segregation. Historically, racial segregation stemmed from explicit discrimination against people of color, such as restrictive covenants, redlining, and discrimination in mortgage lending. This history includes many overtly discriminatory policies made by federal, state, and local governments (Rothstein 2017). Segregation patterns are also affected by policies that appear race-neutral, such as land use decisions and the regulation of housing development.

Segregation has resulted in vastly unequal access to public goods such as quality schools, neighborhood services and amenities, parks and playgrounds, clean air and water, and public safety (Trounstine 2015). This generational lack of access for many communities, particularly people of color and lower income residents, has often resulted in poor life outcomes, including lower educational attainment, higher morbidity rates, and higher mortality rates (Chetty and Hendren 2018, Ananat 2011, Burch 2014, Cutler and Glaeser 1997, Sampson 2012, Sharkey 2013).

Segregation Patterns in the Monterey Bay Area

Across the Monterey Bay Area, Hispanic and Black residents are significantly more segregated from other racial and income groups. The highest levels of racial segregation occur between the Hispanic and Black populations. The analysis completed for this report indicates that the amount of racial segregation both within Monterey Bay Area cities and across jurisdictions in the region has slightly increased since the year 2010.

Segregation and Land Use

It is difficult to address segregation patterns without an analysis of both historical and existing land use policies that impact segregation patterns. Land use regulations influence what kind of housing is built in a city or neighborhood (Lens and Monkkonen 2016, Pendall 2000). These land use regulations in turn impact demographics: they can be used to affect the number of houses in a community, the number of people who live in the community, the wealth of the people who live in the community, and where within the community they reside (Trounstine 2018). Given disparities in wealth by race and ethnicity, the ability to afford housing in different neighborhoods, as influenced by land use regulations, is highly differentiated across racial and ethnic groups (Bayer, McMillan, and Reuben 2004).^[1]

Segregation in the Carmel-by-the-Sea

The following are highlights of demographics as they apply to Carmel-by-the-Sea. For further information regarding the history of racial segregation, please refer to Appendix A.

• As of 2019, white residents are the most segregated compared to other racial groups as measured by the isolation index. White residents live in neighborhoods where they are less likely to come into contact with other racial groups;
• As of 2019, Non-Hispanic White individuals comprise 87 percent of Carmel-by-the-Sea’s population followed by Hispanic or Latino (8 percent) and Asian populations (5 percent);
• The City has no populations identifying as American Indian, Alaska Native, Native Hawaiian or Other Pacific Islander; and
• Black or African American non-Hispanic individuals represent less than 1 percent of the City’s population.

Carmel-by-the-Sea’s General Plan and Municipal Code historically emphasized single-family residential development patterns and consequently, the City offers a limited variety of housing types with 87 percent single family detached units. Historically, this type of development contributed to segregation patterns, including in Carmel-by-the-Sea, due to, among other factors, the higher purchase costs that accompany single-family homes. Financing for single-family properties favored educated higher income earners and as a result purchasing property in the City remained out of reach for many lower income households and lead to the demographics seen in the City today. Though Carmel-by-the-Sea’s population demographics are not as diverse as other jurisdictions within Monterey County and restrictive covenants were not enacted specifically in the City, enacting policies and programs that promote AFFH and highlight the community’s assets could attract individuals to the area, and encourage those that work in the City to live there as well.

Regional Segregation

The following are highlights of regional segregation metrics as they apply to Carmel-by-the-Sea.

• The City has a higher share of white residents than other jurisdictions in the Monterey Bay Area as a whole, a lower share of Latinx residents, a lower share of Black residents, and a lower share of Asian/Pacific Islander residents; and
• Regarding income groups, the City has a lower share of very low-income residents than other jurisdictions in the Monterey Bay Area as a whole, a lower share of low-income residents, a lower share of moderate-income residents, and a higher share of above moderate-income residents.

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This section provides an overview of planning and legislative efforts that provide the context for development of the 6th Cycle Housing Element.

Effectiveness of Previous Housing Element

The 2015 Housing Element identified a Regional Housing Needs Allocation of 31 housing units in Carmel-by-the-Sea between 2015 and 2023. The RHNA was divided into the following income categories:

• 11 units affordable to extremely low- and very low-income households;
• 5 units affordable to low-income households;
• 6 units affordable to moderate-income households; and
• 13 units affordable to above moderate-income households.

During the 2015–2023 planning period, 18 new units were added to the City’s housing stock, none were low or very low income[1]. This indicates that residential growth for extremely and very low-income households was slower than anticipated, which may be in part due to the COVID pandemic, the cost of land and construction, and the overall lack of interest to develop affordable housing in the community. As a result, housing costs continued to increase substantially due to low supply, and affordability became more elusive.

The goals, objectives, policies, and actions in the 2015 Housing Element complied with State Housing Law and provided proper guidance for housing development in the City. In the 2023 Housing Element update, objectives for each of the goals will be modified as appropriate to more specifically respond to the housing environment in Carmel-by-the-Sea from 2023-2031. Policies will also be modified as needed to respond to current Housing Element Law and existing and anticipated residential development conditions. See Appendix E for a complete review and analysis of Carmel-by-the-Sea’s 5^th Cycle Housing Element (2015-2023).

New State Laws Affecting Housing

While the City has taken steps throughout the 5^th cycle to increase housing production locally, the State passed numerous laws to address California’s housing crisis during the same period. As the State passes new legislation in the remainder of the 5^th cycle and during the 6^th cycle, the City will continue to amend the Municipal Code; to monitor and evaluate policies and programs designed to meet State requirements; and to proactively implement new policies and programs to help increase housing production citywide.

In 2019, several bills were signed into law that include requirements for local density bonus programs, the Housing Element, surplus lands, accessory dwelling unit (ADU) streamlining, and removing local barriers to housing production. The City implemented changes required by State law, likely through amendments to the Municipal Code. The following is a summary of recent legislation and proposed City activities that will further the City’s efforts to increase housing production during the 6^th cycle. Please see the section above for a discussion of AB 686 (Affirmatively Furthering Fair Housing).

Climate Change and RHNA Methodology

Per statute, AB 1445 amends California Government Code Section 65584.04 and would require Councils of Governments to consider including the impacts of climate change as a factor when developing the methodology for allocating regional housing need. Regions would specifically need to consider emergency evacuation route capacity, wildfire risk, and sea level rise, but could also consider any other climate change-related factor. Although this does not apply to the current RHNA, it could affect the 7^th cycle allocation.

Incentives for Accessory Dwelling Units

In 2020, AB 686, AB 587, AB 671, AB 881, and SB 13 further incentivize the development of accessory dwelling units (ADUs), through streamlined permits, reduced setback requirements, increased allowable square footage, reduced parking requirements, and reduced fees. The City last amended the Municipal Code in 2017 to address ADUs and currently follows State law.

The City also continues to monitor the existence of unauthorized second units. The City's zoning ordinance facilitates the legalization of unauthorized second units through the zoning clearance/building permit process. In 2023, the City intends to further amend the standards for ADUs and JADUs, consistent with State Law, to facilitate legalization of unauthorized living units and promote construction of new units.

Low-Barrier Navigation Centers

AB 101 (2019) requires jurisdictions to allow “low-barrier navigation centers” by-right in areas zoned for mixed uses and in nonresidential zones permitting multifamily uses, if the center meets specified requirements. A low-barrier navigation center is a service-enriched shelter focused on moving unhoused people into permanent housing. The center provides temporary living facilities while case-managers connect individuals to public benefits, health services, and housing. The City’s Municipal Code will be amended to comply with State law.

Surplus Public Land

AB 1255 and AB 1486 (2020) seek to identify and prioritize state and local surplus lands available for housing development affordable to lower-income households. City-owned land was considered through preparation of the adequate sites inventory of the 6^th Cycle Housing Element. These sites may be developed over time or possibly leased for development.

In 2019, Governor Gavin Newsom signed an executive order to identify State owned sites to help address the California housing crisis.

Accelerated Housing Production

AB 2162 (2018) and SB 2 (2019) address various methods and funding sources that jurisdictions may use to accelerate housing production.

Priority Processing

SB 330 (2019) enacts changes to local development policies, permitting, and processes that will be in effect through January 1, 2025. SB 330 places new criteria on the application requirements and processing times for housing developments; prevents localities from decreasing the housing capacity of any site, such as through downzoning or increasing open space requirements, if such a decrease would preclude the jurisdiction from meeting its RHNA housing targets; prevents localities from establishing non-objective standards; and requires that any proposed demolition of housing units be accompanied by a project that would replace or exceed the total number of units demolished. Additionally, any demolished units that were occupied by lower-income households must be replaced with new units affordable to households with those same income levels.

Housing and Public Safety

In response to SB 379 (2015) and other recent state legislation, local jurisdictions must update their safety element to comprehensively address climate adaptation and resilience (SB 379 and SB 1035, 2018) and identify evacuation routes (SB 99 and AB 747, both 2019). These updates are triggered by the 6^th Cycle housing element update. This housing element will contain an evaluation of the existing safety element and programming actions to update the safety element to satisfy the new state requirements. Also, as sites are identified and analyzed for inclusion in the City’s housing site inventory, special attention will be paid to the risk of wildfire and the need for evacuation routes. In this way, the City will coordinate updates between the elements, so that future development is directed into areas that avoid or reduce unreasonable risks while also providing needed housing and maintaining other community planning goals.

Disadvantaged Communities

In 2011, the Governor signed SB 244 which requires local governments to make determinations regarding “disadvantaged unincorporated communities,” defined as a community with an annual median income that is less than 80 percent of the statewide annual median household income. The City has determined that there are no unincorporated islands or fringe or legacy communities that qualify as disadvantaged communities inside or near its boundaries.

Consistency with General Plan

The City of Carmel-by-the-Sea last adopted it general plan in 1988. The general plan is a long-range planning document that serves as the “blueprint” for development for local jurisdictions in California. All development-related decisions in the City must be consistent with the General Plan, and if a development proposal is not consistent with the plan, then it must be revised or the plan itself must be amended.

State law requires a community’s general plan to be internally consistent. This means that the housing element, although subject to special requirements and a different schedule of updates, must function as an integral part of the overall general plan, with consistency between it and the other general plan elements. From an overall standpoint, the development projected under this housing element is consistent with the other elements in the City’s current general plan.

Many housing needs can only be addressed on a comprehensive basis in concert with other community concerns such as infill development or mixed-use incentives, for example, which must consider land use, traffic, parking, design and other concerns as well.

The City’s housing element is being updated at this time in conformance with the 2023-2031 update cycle for jurisdictions in the Association of Monterey Bay Area Governments (AMBAG) region. The housing element builds upon the other general plan elements and contains policies to ensure that it is consistent with other elements of the general plan. As portions of the general plan are amended in the future, the plan (including the housing element) will be reviewed to ensure that internal consistency is maintained.

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The primary purpose of this chapter is to describe the effort made by the City of Carmel-by-the Sea to engage all economic segments of the community (including residents and/or their representatives) in the development and update of the housing element. This public participation effort also includes formal consultation, pursuant to Government Code §65352.3, with representatives from the Tribal Nations that are present and active in Monterey County. It is also responsive to AB 686 (Affirmatively Furthering Fair Housing), which requires local jurisdictions, as they update their housing elements, to conduct public outreach to equitably include all stakeholders in the housing element public participation program.

The 6^th cycle RHNA numbers are a monumental change for all California communities, and the success of the update process hinged in part on a community outreach and engagement program that was robust, inclusive, and meaningful. The City’s community engagement program has included an initial presentation to City Council, a series of Housing Ad Hoc Committee community meetings, stakeholder outreach, direct contact with interested residents and property owners, and online/virtual participation. Key components of the interactive engagement plan include:

• Website. Housing Opportunities Made Easier (HOME) at HOMECarmel (homecarmelbythesea.com) is a dedicated website that provides portal to all of the housing-element-related public engagement activities that are available to members of the public. This includes information on housing element basics, community ideas board, property owner interest forms, site surveys, site selection details, and materials from community workshops;
• Q&A. Received questions in a managed space that accommodated messages through the iterative brainstorming process; and
• Surveys. Encouraged community-members to voice their opinions in a convenient way that also helped City staff understand what areas of the city need more encouragement to participate. Aggregate data also helped the city understand generally who is participating with the outreach tools.
  • Stakeholder Survey. Released for public engagement on May 24, 2023 to solicit input from Carmel-by-the-Sea residents, property owners, business owners, employees, community activists, and visitors. The survey is currently ongoing. The housing element will contain updated policies and programs as guided by the public’s perspective.
  • Property Owner Interest Form. Released for public engagement on April 6, 2023 to develop a list of property owners interested in building an accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU). The survey is currently ongoing. A list of interested property owners will be added to Appendix C – Sites Inventory when the survey is closed.
• Community Meetings. Hosted to inform and educate the public on the 2023-2031 6^th Cycle Housing Element Update planning process. These meetings are ongoing and continue to guide the policies and programs to ensure Carmel-by-the-Sea’s character and values are upheld.
  • November 17, 2022 Housing Ad Hoc Committee Community Meeting. Hosted to introduce the 2023-2031 6^th Cycle Housing Element Update to community residents.
  • February 28, 2023 Housing Ad Hoc Committee Community Meeting. Hosted to discuss development constraints and potential incentives.
  • April 6, 2023 Housing Ad Hoc Committee Community Meeting. Hosted to discuss current 5^th Cycle Housing Element policies and programs, HOMECarmel unveiling and walk through, and introduction to AFFH.
  • May 24, 2023 Housing Ad Hoc Committee Community Meeting. Hosted to discuss housing needs, fair housing, sites inventory, and policies and programs to address the needs.

Public Participation to Affirmatively Furthering Fair Housing

The Carmel-by-the-Sea public participation program was also responsive to AFFH, which requires local jurisdictions to conduct public outreach to equitably include all stakeholders in the housing element public participation program (see the discussion above for more complete information on AFFH).

The organizations listed in Appendix E were contacted initially with an invitation to further connect. There were more opportunities for deeper connection with some of the Community Based Organizations (CBOs) included with the list.

The City emphasized the power of public participation during the public draft 30-day review period. City messaging expressed the power of public comment during this 30-day period to have the community’s voice included with the public record that will be read by decision-makers and the HCD reviewer, with transparent obligation to be responsive to comments as part of the preliminary draft submittal to HCD.

Tribal Consultation

This public participation effort also includes formal consultation, pursuant to Government Code §65352.3, with representatives from the Esselen Nation that is present and active in Monterey County. Consultation is in process.

Public Review of Draft and Final Housing Element

(To be completed following the Public Review Draft comment period).