With more than 1,100 new homes approved in Morgan Hill since 2008 and no construction having started four years later, the planning commission Tuesday night will consider some revisions to the city’s growth control ordinance in order to speed up the process and make it more understandable to builders, planners and future residents.
But that’s just part of the periodic review process that’s built into the hefty Measure C ordinance that was first approved by voters in 1977, and not part of a “major overhaul” that has been needed since the real estate market crashed, according to Mayor Steve Tate – one that would “streamline” the housing competition process while retaining the city’s intent to keep its population at a manageable level.
Within the next three years Tate wants to see a new ballot measure that residents can vote on to make more substantial changes. A task force that will be formed later this year will suggest those changes and study the matter in-depth as part of the general plan update process.
The residential growth control system places a cap on the number of houses that can be built in the city in any given year, in order to prevent runaway sprawl and sudden impacts on local services and schools. Historically, that number has been about 250. Currently, the policy’s goal is to keep Morgan Hill’s population at or below 48,000 by 2020.
The system forces builders to compete for housing allocations by offering designs and amenities that are higher in quality, as well as off-site improvements – to streets, sewer and other infrastructure – that contribute to the overall public benefit or ease the burden of the city’s public finances. City planners use a points system to value each project based on the proposed attributes, and those who score the highest win a housing allocation.
In the system’s first 30 years, it had never met an economic collapse such as the one that started in 2008 and brought the housing market to its knees.
“From 1997 to 2007, all our allocations got built” on schedule, Tate said. “With the economy going south, we saw that things are not getting built. We got more and more of a backlog and now we’re asking ‘how do you deal with that backlog?’”
Some minor revisions have been made since the housing crash, but still, Tate noted, “It gets more complicated as we go along.”
One of those revisions includes a policy enacted in 2010 to allow builders to opt out of their affordable housing requirements – also built into the growth control ordinance – by paying a fee instead of building the “below market rate” component which turns a lower profit.
Another is the 2008 voter-approved Measure A which exempts builders proposing projects downtown from the competition, allowing more residential and mixed-use development downtown.
Tate suggested one long-term response would be to give more discretion or “flexibility” to the City Council, which is responsible for the ultimate approval of competition winners, proposed project changes and construction schedule extensions.
“You need to give more leeway to the City Council and Planning Commission to make decisions as things change,” Tate said.
A builder who sat on the committee assigned to propose the residential development control system revisions on Tuesday’s planning commission agenda said the process had become more objective and “streamlined” than it was 30 years ago, and that’s preferable to leaving parts of the law up to interpretation by the Council and city staff.
“It simplifies the process,” said Scott Schilling, vice president of community management for Benchmark Homes. “A lot of areas are cut and dry now, and it’s easy to see if you do or don’t” meet the criteria to gain allocations.
Now, more of the criteria on which to award to points are written in detail into the law. For example, Schilling said, the law says points may be awarded or subtracted on the visibility of landscaping improvements from the public street, or how much money a developer contributes to infrastructure beyond the scope of their proposed project.
Schilling added the growth control policy, as it is designed, is inherently unable to adjust to the rapidly changing market.
When a builder wins allocations in the housing competition, they are not required to start building for another 18 months to two years, he said. Within that time frame a lot could happen to the availability of financing and interested buyers. And it did happen starting in 2008, before hundreds of approved allocations reached the construction stage.
Developers and builders in need of an extension of their deadline to begin construction have lined up at City Council meetings to plead their case – for hours, in some cases – to the elected body. If builders do not start building before their deadline or the extended deadline, they lose their allocations and have to wind their way through the competition process all over again.
The Council only approves extensions for reasons beyond the builders’ control, and most of those seeking more time have overwhelmingly cited the lack of financing for the reason for their delays, with pledges to the Council that the money is on the way.
Other acceptable reasons for delays include the lengthy environmental and wildlife studies, and permits required by other agencies such as state Fish and Game, and the Santa Clara Valley Water District, for example.
“The market has really controlled the ability to build a home,” Schilling said. “Regardless of Measure C, if you can’t get financing, that’s what’s created the large backlog.”
Some national development corporations – such as D. R. Horton and KB Homes – have started building in Morgan Hill recently by buying properties that have been foreclosed upon, but which received allocations in previous competitions. But another delay takes effect if the new owner wants to make changes to the original development, because city staff have to go back and “re-score” the changes to ensure they have enough points to start building, Schilling said.
On tap for Tuesday’s planning commission meeting are revisions that make it more difficult to score the highest possible points in certain categories, Schilling said. “In theory,” Schilling said, that could result in higher-quality housing, and will certainly make the process even more competitive.
The growth control system review to be discussed Tuesday takes place after each housing competition, which takes place at least once a year. For the first time, a city council member – Rich Constantine – sat on the review committee.
Constantine agreed the process is “getting very confusing and labor intensive for staff.”
“We only have a few developers who can understand it or are willing to work with it,” he said.
The more comprehensive, long-term overhaul of the system will begin at the end of this year, when the general plan task force is formed. The mayor said the Council wants the general plan review process completed within two years after that, with a measure for the overhauled growth control system to be placed on the ballot sometime after that.
Both Tate and Constantine noted the city will not entertain any changes that remove the existing population cap.
“In no way, shape or form do we want to get away from having a population cap,” Tate said. “We’re still committed to the basic concept of growth control.”
