Public Review Draft Chapter 3

This chapter summarizes housing needs and constraints in the City of Carmel-by-the-Sea. The analysis of housing needs primarily utilizes U.S. Census, ACS 5-Year 2019 Estimate data. For a detailed analysis of housing needs, please see Appendix A— Housing Needs & Fair Housing Report. Also, for a detailed analysis of governmental and non-governmental constraints, please see Appendix B—Housing Constraints.

The following section provides an overview of demographic information, household and housing stock characteristics, and special housing needs in Carmel-by-the-Sea.

Population Growth

According to the Association of Monterey Bay Area Governments (AMBAG) 2022 Regional Growth Forecast, Carmel-by-the-Sea's population is forecast to grow by approximately three (3) percent between 2015 to 2045. This reflects 11 percent less than the County, one (1) percent more than Pacific Grove, and 56 percent less than Del Rey Oaks. Population growth forecasts provide critical insight to the future demands of communities in terms of housing needs, employment, and more.

Age Characteristics

In 2010, Carmel-by-the-Sea’s predominant age group was individuals between 65 and 74 years of age (19 percent). Between 2010 and 2019, the general age of the population began slowly increasing, with the most populous age groups in the City being individuals between 55 and 84 years of age. The City’s median age has changed little since 2010, ranging from 56 in 2010, 54 in 2015, and 59 in 2019. Overall, the City’s aging trend suggests a demand for housing geared toward middle-aged to senior groups.

Carmel-by-the-Sea’s most populous age group in 2019 was individuals 65 to 74 years of age (21 percent). Compared to the County and neighboring cities, Carmel-by-the-Sea has the largest 55 to 85+ age group (43 percent) followed by Pacific Grove (27 percent), Del Rey Oaks (23 percent), and the County (13 percent).

Race and Ethnicity Characteristics

When comparing the City and the County, non-Hispanic White and Hispanic or Latino populations are the most represented; however, the County presents more diversity than Carmel-by-the-Sea. 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). In contrast, the County’s largest population is Hispanic or Latino individuals (60 percent) followed by non-Hispanic White (31 percent). The City has no populations identifying as American Indian or Alaska Native or Native Hawaiian or Other Pacific Islander. Black or African American non-Hispanic individuals represent less than 1 percent of the City’s population.

In 2019, Carmel-by-the-Sea (87 percent) and the neighboring City of Pacific Grove (83 percent) had the largest non-Hispanic White populations compared to Del Rey Oaks (75.5 percent) and the County (30.8 percent). Compared to surrounding cities and the County, Carmel-by-the-Sea had the lowest Asian population (5 percent). Overall, Carmel-by-the-Sea is the least diverse when compared to the County and the neighboring cities of Del Rey Oaks and Pacific Grove.

Between 2010-2019, Carmel-by-the-Sea’s population composition experienced fluctuations in nearly all populations, and by 2019 saw a decline in each population except non-Hispanic White. In 2015, the non-Hispanic White population experienced a two (2) percent decrease in size, while the Asian and Hispanic or Latino populations increased two (2) percent and three (3) percent, respectively. In 2019, Carmel-by-the-Sea experienced a seven (7) percent increase in the non-Hispanic White population, and a decline in both the Asian and Hispanic or Latino populations by four (4) percent and three (3) percent, respectively. Since 2015, population levels have remained less than one (1) percent for Black or African American, American Indian or Alaska Native, Native Hawaiian and Other Pacific Islander populations in Carmel-by-the-Sea.

Racially or Ethnically Concentrated Areas of Poverty and Affluence

A Racially Concentrated Area of Poverty or an Ethnically Concentrated Area of Poverty (R/ECAP) and a Racially Concentrated Area of Affluence (RCAAs) represent opposing ends of the segregation spectrum from racially or ethnically segregated areas with high poverty rates to affluent predominantly White neighborhoods.

The City of Carmel-by-the-Sea is not considered a R/ECAP nor is the City considered an RCAA. As highlighted previously, Carmel-by-the-Sea does not have a majority-minority population and thus cannot be labelled as a R/ECAP. According to the HCD AFFH Data Viewer, less than or equal to 20 percent of the City’s population is non-White. Though Carmel-by-the-Sea’s percentage of exclusively White population and AMI are higher than the county-wide average, the median income in the City is not high enough for the jurisdiction to be considered an RCAA. This could be a reflection of the high vacancy rate (over 50%) which could be explained by the high rate of second home (seasonal use) homeownership in the City.

Employment

According to the AMBAG 2022 Regional Growth Forecast, Carmel-by-the-Sea was projected to experience an employment growth of 17 percent (562 new jobs) between 2015-2045. This projected employment growth mirrors the County (17 percent) and is 4 percent higher than Pacific Grove (13 percent), but reflects one (1) percent lower than Del Rey Oaks (18 percent). This projected increase in job growth presents an opportunity for cities to construct additional housing options for the existing and future workforce.

According to U.S. Census Bureau data reported in a Housing Feasibility Study for the City of Carmel-by-the-Sea by ECONorthwest,[1] a mere 2.6 percent of workers live and work in Carmel-by-the-Sea, while approximately half of all workers live within 10 miles of the City and 26 percent commute from more than 25 miles away.[2] Concentrations in hospitality and leisure services may create obstacles for local workers that earn lower-incomes and cannot afford to live in the community. Such imbalances of jobs to housing impacts an individual’s ability to integrate into the community due to long distance travel, excessive costs of travel, and reduced personal time.

Compared to the County and neighboring cities, Carmel-by-the-Sea has the lowest unemployment rate with less than 1 percent of unemployed residents. This indicates an approximate 4.8 percent less than the County, 5 percent less than the Del Rey Oaks, and 3.8 percent less than Pacific Grove.

Household Characteristics

According to the 2022 AMBAG Regional Growth Forecast, Carmel-by-the-Sea is forecast to have a household growth of approximately one (1) percent by 2045 – an increase of 42 housing units. Compared to the County, this reflects 18 percent less projected growth and two (2) percent less growth than Pacific Grove. Of the neighboring cities, the City of Del Rey Oaks has the highest projected increase in housing unit growth at 61 percent.

Household Type and Size

In Carmel-by-the-Sea, the largest household type was married-couple family households (47 percent) followed by single-person households (40 percent). This is consistent with the County and neighboring cities. Carmel-by-the-Sea has the lowest percentage of female-headed households (6 percent) compared to the County (13 percent), Del Rey Oaks (7 percent), and Pacific Grove (9 percent).

Carmel-by-the-Sea’s largest household type according to size is two-person households (42 percent) followed by one-person households (40 percent). This is consistent with married-couple family households remaining the largest household type since 2010 followed by single-person households. This reflects a demand for affordable housing units appealing to married-couple and single-person households.

Household Income

According to CHAS 2015-2019 data, Carmel-by-the-Sea, above moderate-income households make up the majority of households in the City (62 percent) followed by lower-income households (28 percent). Approximately seven (7) percent of households in Carmel-by-the-Sea identify as extremely low-income.

In 2019, Carmel-by-the-Sea’s median household income was $98,188 – approximately $27,173 higher than the County ($71,015)[4]. The City of Del Rey Oaks had the second highest median household income at $95,000 followed by Pacific Grove at $88,250. Understanding Carmel-by-the-Sea’s median household income determines what income category households identify with and what affordability levels look like for the community.

The household income characteristics in Carmel-by-the-Sea reveal a demand for the development of more affordable housing options that appeal to both lower-income and above-moderate households.

Tenure

The number of residents who own their homes compared to those who rent their homes can help identify the level of housing insecurity (i.e., ability for individuals to stay in their homes) in a City and region. Generally, renters may be displaced more quickly if prices increase.

In Carmel-by-the-Sea, the housing stock includes 828 renter-occupied housing units and 1,099 owner-occupied housing units. When analyzing housing unit type in tandem with tenure, the majority of all housing units are single-family detached (87 percent), of which 17 percent are renter-occupied and 32 percent are owner-occupied.

Homeownership rates often vary considerably across race/ethnicity in the Monterey Bay Area and throughout the country. These disparities not only reflect differences in income and wealth but also stem from federal, state, and local policies that limited access to homeownership for communities of color while facilitating home buying for White residents. While many of these policies, such as redlining, have been formally disbanded, the impacts of race-based policy are still evident across Monterey Bay Area communities.

Tenure by race varies some in Carmel-by-the-Sea as the majority of all households are non-Hispanic White (87 percent), of which 58 percent are owner-households and 42 percent are renter-households. Hispanic or Latino households (8 percent) makeup the second largest population in Carmel-by-the-Sea, of which 72 percent are owner-households and 28 percent are renter-households. Less than 1 percent of Black or African American, Native Hawaiian or Other Pacific Islander, and American Indian or Alaska Native households are represented in the City’s housing market.

In many cities, homeownership rates for households in single-family homes are substantially higher than the rates for households in multi-family housing. In Carmel-by-the-Sea, 98 percent of households in detached single-family homes are homeowners, while 2 percent of households in multifamily housing are homeowners.

Displacement

Because of increasing housing prices, displacement is a major concern in the Monterey Bay Area. Displacement has the most severe impacts on low- and moderate-income residents. When individuals or families are forced to leave their homes and communities, they also lose their support network.

According to the California Department of Housing and Community Development (HCD) AFFH Data Viewer and the Urban Displacement Project 2022 estimates, Carmel-by-the-Sea renter-occupied households earning between 0-80 percent AMI are at low risk of potential displacement or gentrification in the northern region of the City.

Disproportionate Housing Needs

Overcrowding

Understanding the prevalence of overcrowded households within a community helps determine the need for affordable and adequately sized housing units for the community. Overcrowding is defined as a household with more than one occupant per room excluding bathrooms and kitchens. Units with more than 1.5 persons per room are considered severely overcrowded. Overcrowding may occur due to a lack of available affordable and/or adequately sized housing units. Cultural norms and customs combined with low-income or lack of adequately size housing units can result in overcrowding too.

In Carmel-by-the-Sea, the majority of households (94 percent) do not experience overcrowding. Six (6) percent of households in Carmel-by-the-Sea are severely overcrowded and zero percent are moderately overcrowded. When analyzing overcrowding by tenure, 10 percent of renter-occupied households experience severe overcrowding compared to two (2) percent of owner-occupied households. Monterey County has an eight (8) percent higher rate of overcrowding than Carmel-by-the-Sea.

Cost Burden

According to HCD, overpayment or cost burden is measured as households spending more than 30 percent of their gross income including utilities for housing; severe overpayment or severe cost burden is measured as households spending 50 percent or more of their gross income for housing.

The cost burden rates of owners and renters in a community provide insight to housing needs such as, the affordability of the local housing market and the availability of housing units that accommodate household needs like size and housing type. Additionally, federal and state agencies examine cost burden to determine a community’s need for housing assistance.

In Carmel-by-the-Sea, 23 percent of households are cost burdened and 23 percent are severely cost burdened, while the County has a cost burden rate of 22 percent and a severe cost burden rate of 18 percent. It is important to relate Carmel-by-the-Sea’s 46 percent total cost burden to the 10 percent of renter households experiencing overcrowding, as these may be indicators of an unaffordable and homogenous local housing market.

When analyzing cost burden by tenure, renter and owner households experience similar levels of cost burden. Renter-occupied households experience 24 percent cost burden and 23 percent severe cost burden (47 percent total), whereas owner-occupied households experience 23 percent cost burden and 22 percent severe cost burden (45 percent total).

Neighborhoods

All Carmel-by-the-Sea residents live in neighborhoods identified as “Highest Resource” areas by State-commissioned research, while none live in areas identified by this research as “Low Resource” or “High Segregation and Poverty” areas. These neighborhood designations are based on a range of indicators covering areas such as education, poverty, proximity to jobs and economic opportunities, low pollution levels, and other factors.^[5]

Special Needs Groups

Extremely Low-Income Households and Poverty Status

Extremely low-income households are those that earn less than 30 percent of the median family income (MFI). Very low-income households are those that earn 50 percent of less of the MFI.

The 2015-2019 Comprehensive Housing Affordability Strategy (CHAS) data indicates there were approximately 310 extremely low- and very low-income households living in Carmel-by-the-Sea. There are approximately 140 extremely low-income households in Carmel-by-the-Sea, 100 of which are owner-occupied households and 40 extremely low-income renter-occupied households.

In Carmel-by-the-Sea, 62 percent of households make more than 100 percent of the Area Median Income (AMI),^[6] compared to 7 percent making less than 30 percent of AMI, which is considered extremely low income. In Monterey County, 30 percent AMI is the equivalent to the annual income of $21,305. Many households with multiple wage earners, including food service workers, full-time students, teachers, farmworkers and healthcare professionals, can fall into lower AMI categories due to relatively stagnant wages in many industries.

Throughout the region, there are disparities between the incomes of homeowners and renters. Typically, the number of low-income renters greatly outpaces the amount of housing available that is affordable for these households. In Carmel-by-the-Sea, the largest proportion of both renters and homeowners fall in the Greater than 100 percent of AMI group. Lower-income owner-occupied households as a whole (0-80 percent of AMI), makeup 16 percent of households and renter-occupied households makeup 13 percent of households.

Currently, people of color are more likely to experience poverty and financial instability as a result of federal and local housing policies that have historically excluded them from the same opportunities extended to white residents.^[7] These economic disparities also leave communities of color at higher risk for housing insecurity, displacement or homelessness. In Carmel-by-the-Sea, Black or African American residents experience the highest rates of poverty (50 percent), followed by Hispanic or Latinx residents (13 percent).

Seniors

Seniors are identified as individuals 65 years and older. Senior households often experience a combination of factors that can make accessing or keeping affordable housing a challenge. They often live on fixed incomes and are more likely to have disabilities, chronic health conditions and/or reduced mobility. Seniors who rent may be at even greater risk for housing challenges than those who own, due to income differences between these groups.

In Carmel-by-the-Sea, senior households makeup 43 percent of all households, of which 15 percent rent their homes. Similarly, the County and neighboring cities’ senior households primarily own their homes. The majority of Carmel-by-the-Sea senior households earn a yearly income of $200,000 or more (14 percent). However, an estimated 61 percent of senior households earn less than the City’s median household income ($98,188).

People with Disabilities

Developmental disabilities are defined as severe, chronic, and attributed to a mental or physical impairment that begins before a person turns 18 years old. This can include Down’s Syndrome, autism, epilepsy, cerebral palsy, and mild to severe mental retardation. Some people with developmental disabilities are unable to work, rely on Supplemental Security Income, and live with family members. In addition to their specific housing needs, they are at increased risk of housing insecurity after an aging parent or family member is no longer able to care for them.

Overall, 12 percent of people in Carmel-by-the-Sea have a disability of some kind. Of the 12 percent of people with a disability, approximately less than 70 individuals have a developmental disability.[8] Of the individuals in Carmel-by-the-Sea with a developmental disability, less than 31 are children (i.e., under the age of 18) and less than 36 are adults. The most common living arrangement for individuals with disabilities in Carmel-by-the-Sea is the home of a parent/family/guardian.[9]

Large Households

Large households are defined as households of five (5) or more individuals. Large households often have different housing needs than smaller households. Household income and local housing markets can greatly impact a household’s ability to afford adequately sized housing. If a city’s rental housing stock does not include larger apartments, large households who rent could end up living in overcrowded conditions. Similarly, large households may experience overpayment as a result of a high housing market and limited availability.

Carmel-by-the-Sea has 70 large households of which 57 percent are renter-occupied households. Renter-occupied households makeup the majority of all 3-5+ person households. This combined with a total cost burden rate of 46 percent for renter-occupied households, suggests it is likely that large households in Carmel-by-the-Sea may experience overcrowding and/or overpayment.

Single-Parent Households

Households headed by one person are often at greater risk of housing insecurity, particularly female-headed households, who may be supporting children or a family with only one income. Female-headed households with children may face particular housing challenges, with pervasive gender inequality resulting in lower wages for women. Moreover, the added need for childcare can make finding a home that is affordable more challenging.

In Carmel-by-the-Sea, female-headed family households make up 75 percent of single-parent households and male-headed households makeup 25 percent. This is consistent with the County and neighboring cities. In 2019, there were no single-parent households that fell in the Below Poverty Level category in Carmel-by-the-Sea.

Farmworkers

Across the state, housing for farmworkers has been recognized as an important and unique concern. Farmworkers generally receive wages that are considerably lower than other jobs and may have temporary housing needs. Finding decent and affordable housing can be challenging, particularly in the current housing market.

According to the California Employment Development Department, the average farm worker (Farming, Fishing, and Forestry Occupation) in Monterey County earned a median annual income of $29,901. This annual income places each individual or household in the very low-income bracket for Carmel-by-the-Sea. Additionally, this limited income may be significantly impacted by employment status (permanent or seasonal).

There are no agriculture uses within the City of Carmel-by-the-Sea. Nonetheless, Carmel-by-the-Sea shares the responsibility for farmworker housing as farmworkers may work within 75 miles of agricultural land uses (including dairy, vineyards and produce) and the City is within 75 miles of these uses.

Persons Experiencing Homelessness

Homelessness remains an urgent challenge in many communities across the state, reflecting a range of social, economic, and psychological factors. Rising housing costs result in increased risks of community members experiencing homelessness. Far too many residents who have found themselves housing insecure have ended up homeless in recent years, either temporarily or longer term. Addressing the specific housing needs for the unhoused population remains a priority throughout the region, particularly since homelessness is disproportionately experienced by people of color, people with disabilities, those struggling with addiction and those dealing with traumatic life circumstances.

In Monterey County, the most common type of household experiencing homelessness is those without children in their care. Among households experiencing homelessness that do not have children, 83 percent are unsheltered. Forty-five (45) percent of homeless households with children are unsheltered. In Carmel-by-the-Sea, the number of households experiencing homelessness has decreased between 2017 to 2022 from 16 persons to one (1), respectively.

Housing Stock Characteristics

Housing Growth

The number of new homes built in the Monterey Bay Area has not kept pace with the demand, resulting in longer commutes, increasing prices, and exacerbating issues of displacement and homelessness. In 2019, Carmel-by-the-Sea had 3,832 housing units, an approximate 6 percent increase from the 3,606 units that existed in 2010. This reflects 4 percent more growth than Monterey County during the same period.

Between 2015 and 2022, 18 housing units were issued permits in Carmel-by-the-Sea which represents 58 percent of the RHNA number of 31 units assigned in the 5^th Cycle Housing Element. Of the 18 housing units permitted, all were for above moderate-income.

Housing Type

In recent years, most housing produced in the region and across the state consisted of single-family homes and larger multi-unit buildings. However, some households are increasingly interested in “missing middle housing,” including duplexes, triplexes, townhomes, cottage clusters and accessory dwelling units. These housing types may open up more options across incomes and tenure, from young households seeking homeownership options to seniors looking to downsize and age-in-place.

It is important to have a variety of housing types to meet the needs of a community today and in the future. In 2019 Carmel-by-the-Sea’s mix of housing types was as follows:

• 87 percent of homes were single-family detached;
• 10 percent were multifamily;
• 2 percent were mobile homes; and
• 1 percent were single-family attached.

Chapter 2 of the Housing Element includes programs to expand the variety of housing types available in Carmel-by-the-Sea.

Housing Availability

Compared to the County and neighboring cities, Carmel-by-the-Sea has the highest vacancy rates at 50 percent. From 2010 to 2019, the City has experienced a stable vacancy average of 51 percent as a result of tourism and second-home ownership. Eighty (80) percent of Carmel-by-the-Sea’s vacant units are for seasonal, recreations, or occasional (second home) use, aligning with the 51 percent average vacancy trends. This creates a significant barrier for current and potential residents to enter the local housing market and squanders opportunities to correct the housing crisis, address diversity, and provide inclusive housing options to promote a vibrant and active community.

The House Element includes programs to address the high vacancy rate related to occasional (second home) use. All policies and programs can be found in Chapter 2 of the Housing Element.

Displacement

Because of increasing housing prices, displacement is a major concern in the Monterey Bay Area. Displacement has the most severe impacts on low- and moderate-income residents. When individuals or families are forced to leave their homes and communities, they also lose their support network.

According to the California Department of Housing and Community Development (HCD) AFFH Data Viewer and the Urban Displacement Project 2022 estimates, Carmel-by-the-Sea renter-occupied households earning between 0-80 percent AMI are at low risk of potential displacement or gentrification in the northern region of the City. Displacement risk data is insufficient for the central and southern regions of the City.

Housing Costs and Affordability

Housing costs reflect a complex mix of supply and demand factors, including an area’s demographic profile, labor market, prevailing wages and job outlook, coupled with land and construction costs. In the Monterey Bay Area, the costs of housing have been steadily increasing since 2000, besides a decrease during the Great Recession.

A diversity of homes at all income levels creates opportunities for all Carmel-by-the-Sea residents to live and thrive in the community. The following represent current housing costs in Carmel-by-the-Sea:

• Ownership: The median home value was estimated to be $2,070,835 in 2022. Home prices increased by 59 percent from 2019 to 2022 This reflects a 20 percent higher increase than the County, which is similar to neighboring cities.[10]
• Rental Prices: As of 2023, the average rent for an apartment in Carmel-by-the-Sea ranged from $2,200 (studio) to $5,459 (three bedrooms).[11]

Income groups are based on the HCD 2022 State Income Limits Report, which considers housing affordable assuming a household can pay up to 30 percent of its monthly income toward housing.

As discussed earlier, the median home price in Carmel-by-the-Sea in December 2022 was $2,070,835 which is only affordable to above moderate-income households earning approximately $495,000 annually or more (62 percent of Carmel-by-the-Sea households are categorized as above moderate-income).

Housing development is affected by government regulations and other non-governmental forces, such as the cost of land and building materials and the availability and cost of housing loans. Housing elements are required to investigate the impact of these constraints as they present themselves in the city for which the housing element is being prepared. This subsection provides a brief overview of governmental and non-governmental constraints in the City. Please see Appendix B for a full discussion of housing constraints.

Summary of Governmental Constraints

The governmental constraints to the development of affordable housing in Carmel-by-the-Sea are summarized below.

Location in the Coastal Zone

Carmel-by-the-Sea is located in the California Coastal Zone and is therefore subject to a host of regulations that are not present in communities outside the Coastal Zone. The presence of additional land use regulation via the Local Coastal Program, in general, means that housing development in Carmel-by-the-Sea faces a high bar to succeed

Most of the recent remedies brought forward by the California legislature to facilitate housing development are either outright inapplicable in the Coastal Zone (SB 35) or are secondary to California Coastal Commission policies that protect habitat resources (SB 9).

Conversion of Motels for Multi-Family Housing (Opportunity)

The City will explore the development of a program to allow the transfer of development rights of hotels and motels located in the R-1 zoning district to the commercial zoning district. This might allow older motels to convert to multi-family housing and thereby provide a new source of affordable housing in the community.

Accessory Dwelling Units

The City of Carmel-by-the-Sea last updated it ADU ordinance in 2017, and therefore the City’s regulations addressing ADUs are out of date. The City has included a new program in this 6th Cycle Housing Element to revise its Zoning Code to be consistent with ADU and JADU state law, incentivize manager’s units in existing hotels and motels and develop standardized ADU plans.

Manufactured Homes and Mobile Homes

A new program to amend the Municipal Code to clarify that manufactured homes and mobile homes are allowed as a permitted use in the R-1 zoning district is included in the Housing Element.

Multi-Family Housing

Currently, the City allows multi-family housing without a conditional use permit (CUP) at densities up to 22 dwelling units per acre. In order to provide additional incentive to build multi-family housing, the City will amend the Code to remove the CUP for multi-family developments up to
33 du/ac.

Transitional and Supportive Housing

The 6^th Cycle Housing Element includes a program to update the Municipal Code to further clarify that transitional and supportive housing in the R-1 and R-4 zoning district are permitted uses.

Low Barrier Navigation Centers

A program has been included in the element to develop by-right procedures for processing low-barrier navigation centers.

Development Standards for Senior Housing

A program is included to address the lack of development standards in the A-2 zone in order to provide greater clarity and certainty to guide and future development design.

Lack of Water Resources

The primary infrastructure constraint to the development of housing in Carmel is the lack of potable water. The lack of a reliable available water supply continues to limit growth in Carmel and throughout the Monterey Peninsula region.

Non-Governmental Constraints

In terms of non-governmental constraints, the availability of land and land costs will remain a constraint to affordable housing, and programs to use publicly-owned lands—such as City-owned land—can make a difference. The cost of construction and construction materials is also a constraint, and to the degree that the City can subsidize affordable housing projects with available funds dedicated to housing, this too can make a difference.