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Recent discussions among Morgan Hill elected officials, developers and other residents highlight the need for simplicity and—for some—more equality in the city’s complicated growth control ordinance, especially as local housing demand is projected to increase rapidly in the coming years.
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The Morgan Hill City Council is getting ready to send a new version of its Residential Development Control System back to the voters in November. The ordinance, first approved at the polls in 1977, requires housing developers to compete for a limited number of allotments per year by adding features to their projects that contribute to a numerical “score” that stacks them up against their colleagues. The planning commission and council each year determine which projects score the highest, and which developers get to build the homes, which average about 250 per year.
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When the council was asked in May to approve a higher-than-usual number of annual allotments for the next two competitions, a series of head-turning discussions, decisions and reversals ensued. The topic illustrated a growing conundrum that the council hopes to solve in the next version of the RDCS: developers of large-scale, higher-density projects and apartment complexes find it difficult to gain enough allocations to complete, or even start, construction. Councilmembers repeatedly said even if such developers have detailed plans that meet or exceed City Hall’s building and planning requirements, there is no guarantee they can reach completion under RDCS limits.
Higher housing needs
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And the demand for these projects is growing in Morgan Hill, as developers spend increasing amounts of private funds to win their desired allotments.
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One such developer is CalAtlantic Homes, which plans to build 135 single-family houses for sale at the corner of Mission View Drive and Cochrane Road, next to the Target shopping center.
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“(Projects) such as ours have competed in five RDCS processes at a cost of over $100,000 in City fees alone, have 83 out of 135 allocations, and have no clear path for achieving our remaining 52 allocations,” CalAtlantic Vice President Bridgit Koller wrote in a May 19 e-mail to city staff and the council.
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Koller wrote the e-mail to note her displeasure at the council’s May 18 decision (which was reversed the following week) to reserve up to 133 units from the future competition for rental complexes, a decision she called “inequitable.”
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For the 2018-19 RDCS competition, the council May 25 approved a total of 105 units in the multi-family rental category, with 85 of these devoted to a single apartment complex proposed at San Pedro Avenue and Condit Road. The developer of that project, which will contain about 170 apartments when completed, is Presidio Development.
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Last year, the council changed the General Plan and zoning of a 19.5-acre vacant industrial site at Butterfield Boulevard and Jarvis Drive to allow the development of a 385-unit apartment project.
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Developer Mwest is still in the process of designing the project, and has not yet received any allocations despite competing in last year’s RDCS.
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“There still should be a competition, with an emphasis on quality,” Councilmember Larry Carr said shortly after the May 18 meeting. “But what is difficult for any kind of attached housing is, if you only get 10 or 15 allocations a year, it’s hard to put your project together. You don’t build half of a building.”
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Morgan Hill hasn’t seen a new apartment complex in more than a decade, and the increasing demand is one reason the council brainstormed different ways to make more allocations available for apartment builders at two lengthy meetings in May. That included reserving up to 133 units from the 2019-20 competition for multi-family rental projects, and applying them to the 2018-19 competition. Such a move of units from a future competition was unprecedented, and the council ended up reconsidering and reversing the decision at the May 25 meeting. Carr, who previously supported the move of units from the future, requested the reconsideration and voted with the May 25 majority.
Costs to compete
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Orville Power, speaking for the San Pedro-Presidio development—“the other large rental project”—told the council May 25 that his company spent between $3 million and $5 million last year to include features in their project that raked in points in the RDCS competition.
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“When I saw you’re now going to take 133 allocations and put them into (the next competition), that’s changing the rules of the game… I don’t think that’s fair,” Power said.
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Developers were also displeased that the council declined to cap the annual allotments for the 2018-19 and 2019-20 competitions (the last two contests before the current RDCS expires) at 282 homes. The council ultimately set the total maximum allotments at 250 for each year, a number that Koller suggested will contribute to the slow phasing of larger projects.
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The competition for the 2018-19 allotments starts Sept. 1, 2016.
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The current RDCS expires in 2020, and sets a maximum population for Morgan Hill at 48,000 for that year. The council plans to submit a ballot measure for the Nov. 8 election, asking voters to extend the growth control system until 2035.
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The working draft of the new RDCS system sets a population cap of 59,000 for 2035. Council and public discussions on the new version of the RDCS will continue before the council submits a final draft this summer for the voters to consider.
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In most previous years, the RDCS and the council have allowed up to 250 housing units annually in Morgan Hill, based on calculations that allow the population to grow steadily toward the 48,000 cap. Some years in the past, the housing cap—set annually by the council—has exceeded 250, according to city staff. The current population of Morgan Hill is about 44,400.
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But the council and developers don’t know if the voters will approve the new RDCS. This is one reason the council opted not to deploy a two-year competition starting Sept. 1.
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Mayor Pro Temp Rich Constantine was the only councilmember who supported the failed staff-recommended cap of 282 homes for the next two years. However, the council is unanimous in hoping the voters approve an RDCS extension in November.
The current draft of the new RDCS allows for up to five-year competitions, according to city officials. This is a response to the history of uncertainty for apartment and large-scale single-family project developers who currently don’t know if they will ever gain enough allocations to complete their plans.
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On-going projects: 15
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Affordable set-aside: 50
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Micro projects: 5
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Small projects: 5
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Multi-family rental: 10
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Multi-Family Rental (>150 units): 95 *
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Open/Market: 65
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Senior: 0
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Monterey Corridor Area Projects: 5
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Total: 250
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*85 units for San Pedro-Presidio apartment project, located at San Pedro Avenue and Condit Road.
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Source: City of Morgan Hill
