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Staff Report 07-24-23 PCPH 08-28-23 LU 23-0023 STAFF REPORT CITY OF LAKE OSWEGO PLANNING AND BUILDING SERVICES DEPARTMENT APPLICANT FILE NO. City of Lake Oswego LU 23-0023, Ordinance 2934 LOCATION STAFF Citywide Erik Olson, Long Range Planning Manager DATE OF REPORT PLANNING COMMISSION HEARING DATE July 24, 2023 August 28, 2023 I. APPLICANT'S REQUEST The City of Lake Oswego is proposing to adopt an updated Housing Needs Analysis (HNA), to meet the requirements of Oregon House Bill 2003 (2019) and OAR 660-08-0045. (The current HNA was adopted in 2013.) II. APPLICABLE REGULATIONS A. Oregon Statewide Planning Goals Goal 10: Housing B. Interpretation of Goal 10: Housing (OAR Chapter 660, Division 8) OAR 660-008-0045 Housing Capacity Analysis Deadline C. ORS Chapter 197 - Comprehensive Land Use Planning ORS 197.296 Analysis of housing capacity and needed housing by Metro, cities outside of Metro and smaller cities D. City of Lake Oswego Community Development Code LOC 50.07.003.3.c Notice of Public Hearing LOC 50.07.003.4 Hearings before a Hearings Body LOC 50.07.003.16.a Legislative Decision Defined (Quasi-judicial Comp. Plan Map, Zone Map, and CDC Amendments to be processed via Major Developments Procedures) Respect Trust. Service. 503-635-0290 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY LOC 50.07.003.16.c Required Notice to DLCD LOC 50.07.003.16.d Planning Commission Recommendation Required LOC 50.07.003.16.e City Council Review and Decision E. Metro Code Urban Growth Management Functional Plan Title 7: Housing Choice [MC 3.07.730] III. BACKGROUND AND DISCUSSION Lake Oswego is a community of over 41,500 residents that has experienced modest, yet steady growth in recent decades. Since 2000, the City has added nearly 6,300 people, a rate of less than 1% per year. At the same time, buildable land within the city has become scarcer, the cost of housing has increased significantly, and the city's housing needs have evolved as a result. Now, the City has an opportunity to take stock of these changes and look forward through a forecast of housing needs over the next 20 years. Per House Bill 2003 (HB 2003) (2019) and HB 3155 (2021), now codified as ORS 197.290 and 197.297(1), the City must analyze what housing is needed for its current and future residents through an update to the Housing Needs Analysis (HNA); the Department of Land Conservation and Development (DLCD) has established through OAR 660-08-0045 a timeline that requires the City to adopt an updated HNA by December 31, 2023. The City is then required to develop a Housing Production Strategy (HPS) that outlines what actions the City will take to address those needs prior to December 31, 2024, in order to comply with the law. The City Council first prioritized this work as part of their 2022 goals and initiatives, which included continuing the multi-year work plan to complete work on key housing initiatives— including HB 2003 compliance. Subsequently, the Planning Commission adopted a 2023 goal to, "Continue the multi-year work plan to comply with House Bill 2003 - Housing Needs and Production." The City contracted with consultant MIG and subconsultant Johnson Economics (collectively "consultant team") to assist with this work in Fall 2022. City staff and the consultant team conducted outreach and community engagement related to the 2023 HNA from December 2022 through July 2023. This engagement occurred through several avenues and public events, including an Online Open House, a "Community Forum" event, two Planning Commission work sessions, two City Council study sessions, and three meetings of the City-appointed Ad-Hoc Housing Production Strategy Task Force per Resolution 22-30, charged with providing high-level policy guidance to the Planning Commission and City Council on their efforts to comply with HB 2003. These events helped to identify general themes and topics of discussion related to initial drafts of the HNA, with later revisions directly informed by the public input collected through these events and the direction provided by the Commission and City Council. The 2023 HNA is in compliance with LCDC Goal 10, Housing, to establish an inventory of the supply of buildable lands within the city, an inventory of the housing capacity of buildable land zoned for residential use, and a projection of anticipated needed housing and how it may, or may not, be Planning Commission Public Hearing Page 2 of 12 LU 23-0023 August 28,2023 accommodated throughout the city. The proposed 2023 HNA serves the primary purpose of being a factual basis for further work about the policies, programs, and actions that the City can consider to address its current and future housing needs through the HPS. Housing Needs Analysis An HNA is a document, incorporated into a city's comprehensive plan by ordinance, which assesses housing need and capacity over the course of a 20-year planning horizon. An HNA must include the inventory, determination, and analysis required under ORS 197.296(3): (3) In performing the duties under subsection (2) of this section, a local government shall: (a) Inventory the supply of buildable lands within the urban growth boundary and determine the housing capacity of the buildable lands; and (b) Conduct an analysis of existing and projected housing need by type and density range, in accordance with all factors under ORS 197.303 ("Needed housing"defined) and statewide planning goals and rules relating to housing, to determine the number of units and amount of land needed for each needed housing type for the next 20 years. The City last updated its HNA in 2013 as part of an update to the Comprehensive Plan. House Bill 2003 HB 2003 (2019) was enacted by the Oregon Legislature to meet the housing needs of residents throughout the state by requiring that cities with over 10,000 residents: (1) analyze the future housing needs of their community through an HNA, and (2) develop strategies that promote the development of such needed housing through a Housing Production Strategy (HPS). In November 2020, DLCD adopted implementing rules for HB 2003, which are contained, in part, in OAR 660-008-0045 through -0070. These rules established criteria for compliance, including the components that are required to be included within an HPS Report. Lake Oswego is required by OAR 660-08-045 to adopt an updated HNA by December 31, 2023, and by ORS 197.297(1), enacted in 2021, to update its HNA once every six years thereafter. As such, the City's next HNA is required to be adopted by December 31, 2029. On June 21, 2022, the City Council approved staff's work plan for compliance with HB 2003, including issuing a request for proposals (RFP) to solicit consultant services. Council also committed to appoint an Ad-Hoc Housing Production Strategy Task Force ("Task Force") to provide high-level policy guidance to the Commission and City Council as the City proceeds with HB 2003 compliance. The Commission held its first work session on this subject on June 27, 2022, providing guidance to staff on the proposed work plan prior to issuing the RFP. (Report continues on next page) Planning Commission Public Hearing Page 3 of 12 LU 23-0023 August 28,2023 Housing Production Strategy Task Force On October 4, 2022, the City Council adopted Resolution 22-30 creating the Task Force and appointing its members.'The Task Force is comprised of individuals from a diverse range of backgrounds, identities, income ranges, and professions, with representation from elected and appointed officials, members of City boards and commissions, DLCD representatives, housing producers, and housing consumers within Lake Oswego. The goal of the Task Force is to represent a wide range of experiences and ideas related to housing, and to develop recommendations addressing those perspectives. The role of the Task Force is to provide guidance to staff and the Planning Commission by reviewing draft materials, providing feedback related to their personal or professional experience and opinions, and informing the broader public about this process through their individual networks. The Task Force may also recommend outreach strategies, Comprehensive Plan amendments, or other actions to update the City's HNA and develop an HPS, consistent with adopted goals and initiatives related to housing. The Task Force is charged with meeting a minimum of five times from December 2022 through late 2024 in order to develop these policy recommendations. At this stage of the project, the Task Force has met three times: • On December 16, 2022, the Task Force held a "kickoff meeting" to establish the organization and management of the Task Force, receive overview of House Bill 2003, and review the project work plan; • On March 24, 2023, the Task Force held their second meeting to review and provide input on initial drafts of two components of the HNA—the Draft Housing Capacity Analysis (HCA) and Draft Residential Buildable Lands Inventory (BLI); and • On June 23, 2023, the Task Force met for a third time to review comments received during the first round of public engagement related to the initial HNA draft, review and provide input on revised drafts of the BLI and HCA, and receive a presentation with an introductory overview of Housing Production Strategy categories. Other Public Engagement In addition to the work of the Task Force, City staff and the consultant team offered opportunities for public engagement and comment through the following events: • On January 23, 2023, a second work session was held at the Planning Commission that included a presentation outlining the requirements of HB 2003 and a proposed public involvement plan for the City's 2023 HNA; • On February 21, a second study session was held at City Council that included a presentation outlining the requirements of HB 2003 as related to the City's 2023 HNA and developing an HPS; 1 Subsequently,City Council adopted Resolution 23-06 on February 7,2023,to add an official liaison from the Diversity, Equity,and Inclusion Board to the Task Force,and Resolution 23-29 on June 20,2023,to add liaisons from DLCD to the Task Force. Planning Commission Public Hearing Page 4 of 12 LU 23-0023 August 28,2023 • On March 20, the draft BLI and HCA documents were distributed to City-recognized neighborhood associations, City boards and commissions, and interested members of the public for their input and review; • On March 31, the City opened an Online Open House that explained the information in the draft BLI and HCA documents and allowed for public input through April 21; • On April 6, the City held a virtual "Neighborhood Forum" to provide information and receive direct public input on the draft BLI and HCA; • On April 10, 2023, a third work session was held with the Planning Commission to review the draft HNA findings and provide direction to staff; • On April 18, 2023, a third study session was held with City Council to review the draft HNA findings and provide direction to staff; and • On May 22, 2023, an update was provided to the Planning Commission with a summary of comments received during public engagement related to initial drafts of the HNA. Staff and the consultant team have revised the draft BLI and HCA based on public input and the direction provided by the Commission and City Council. See Revisions to Draft BLI and HCA, below. Housing Needs Analysis Report Summary The 2023 HNA Report compares the amount and type of land available for future residential uses, as determined by the BLI, with the amount and types of housing units needed, as determined by the HCA. The BLI identifies land that can be expected to provide residential capacity for Lake Oswego in the next 20 years. The general steps taken to produce the draft BLI include: • Step 1: Study Area and Land Classification. This step identifies the land in the City that is available for residential uses, using information such as comprehensive plan/zoning designation, ownership information, and tax assessor data. Land that is in public ownership (such as owned by a school district or commonly owned by a homeowner's association) or religious/fraternal ownership is generally not considered available for residential uses. • Step 2: Constraints to Development. This step identifies constraints such as natural resources, steep slopes, and utility easements that may limit development. Land affected by these constraints is totally or partially removed from the inventory. • Step 3: Development Status. This step assigns a "Development Status" of vacant, partially vacant, or developed tax lots in the inventory. Partially vacant land has an existing structure but is assumed to be available for future infill —for example a single home on a lot that is large enough to accommodate more homes. • Step 4: Net Buildable Area and Unit Capacity. This step removes land for future rights-of- way and other land needs to provide a net number of acres for each City zoning designation, then estimates number of units. Planning Commission Public Hearing Page 5 of 12 LU 23-0023 August 28,2023 As shown in the BLI, there are approximately 175 developable acres of residentially-zoned land and 10 developable acres of land zoned for mixed-use, resulting in a total of 185 developable acres within the City. The estimated unit capacity for this area is approximately 851 dwelling units. The BLI identifies an additional capacity for 110 units of middle housing infill and 366 units that have been approved by the City but not yet constructed, resulting in a total capacity of 1,327 dwelling units. The HCA includes research and analysis to outline a forecast of housing need within Lake Oswego by 2043. The primary data sources used in generating this forecast were: • Portland State University Population Research Center (current population); • Metro (forecasts of future population); • U.S. Census; • Claritas;2 • Oregon Employment Department; • City of Lake Oswego; and • Clackamas County. This analysis relies heavily on census data from both the 2020 Decennial Census and the American Community Survey (ACS). All census data feature some margin of error but remain the best source of data available on many demographic and housing subjects. The HCA includes the following components: • A demographic profile, including population growth, income trends, and poverty statistics; • Current housing conditions, including housing tenure (rental/ownership), age of housing stock, unit types, and assisted housing; • An assessment of current housing demand, based on population characteristics and the availability of housing units; and • An assessment of future housing need, based on forecasted population growth and a variety of other anticipated demographic and housing market trends. The HCA shows that Lake Oswego has an estimated current population of 41,550 residents, representing a 13% increase between 2010 and 2023. The City currently has an estimated existing stock of 18,345 housing units, representing an 8% increase since 2010. The average household size in Lake Oswego is currently 2.36 persons per household. 2 Claritas is a third-party company providing data on demographics and market segmentation. It licenses data from the Nielson Company which conducts direct market research including surveying of households across the nation. Nielson combines proprietary data with data from the U.S.Census, Postal Service,and other federal sources,as well as local-level sources such as Equifax,Vallassis and the National Association of Realtors. Projections of future growth by demographic segments are based on the continuation of long-term and emergent demographic trends identified through the above sources. Planning Commission Public Hearing Page 6 of 12 LU 23-0023 August 28,2023 The estimated population in Lake Oswego for 2043 is 41,961 residents, with an average household size of 2.16 persons per household.This represents a relatively modest projected annual growth rate of 0.05%, which is markedly lower than the amount of growth the City experienced in the last few decades. The decrease in household size from 2.36 (2023) to 2.16 (2043) is notable, as even though the growth rate is expected to decrease, the number of persons per household is also expected to decrease. This results in a projection of more new households than new residents over the 20- year study period, with 1,816 new households projected in the City by 2043, and an estimated need for 1,968 new housing units, or 20,313 units in total. The HNA Report includes a reconciliation of the anticipated future housing needs identified in the HCA and the land supply identified in the BLI. The results show a projected deficit of 642 dwelling units, or 86 acres, in the City by 2043. This includes a deficit of 192 units (38 acres) in low-density zones, 249 units (31 acres) in medium-density zones, and 201 units (17 acres) in high-density zones. For more background on the BLI and HCA, see Exhibit D-3. Revisions to Draft BLI and HCA Following the release of initial drafts of the BLI and HCA, staff and the consultant team revised the documents in response to the comments received during public engagement events, as well as direction from the Commission and City Council. These changes included defining the BLI study area as being coterminous with the City boundary. Previous versions of the BLI used a broader study area that included land outside of the City boundary. Staff and the consultant team coordinated with the Task Force and DLCD to clarify the geographic scope of the analysis; the study area for the BLI has been re-defined as being within the City boundary to ensure consistency with the HCA. In addition, the BLI was revised to include a more accurate forecast that better considers Conditions, Covenants, and Restrictions (CC&Rs)that could preclude the development of middle housing in certain areas. (CC&Rs are private legal agreements that are not enforced or maintained by the City.) The City has not conducted a comprehensive review to identify CC&Rs that may preclude middle housing; to do so would require obtaining the CC&R—and there is no central repository other than at the county clerk's office, but they don't have an index only of CC&RS— and then staff review of each of the CC&Rs. While the initial draft of the BLI included an assumption that 3% of all detached single-family units would be converted to duplexes or other types of middle housing, the revised version anticipates that only 1.5% of detached single-family units will convert to middle housing due to the widespread presence of density-restrictive CC&Rs for lands within the city. Planning Commission Public Hearing Page 7 of 12 LU 23-0023 August 28,2023 The revised BLI also does not anticipate middle housing conversions in areas with known Planned Developments (PDs) and Planned Unit Developments (PUDs), since a land use application would be required to modify an existing PD or PUD to include additional middle housing units3. The BLI has also been updated to include a more accurate reflection of the amount of residential capacity approved at the former Marylhurst university site. IV. NOTICE OF APPLICATION A. Newspaper Notice On August 16, 2023, public notice of the proposed Comprehensive Plan amendments and Planning Commission public hearing will be published in the Lake Oswego Review. B. DLCD and Metro Notices Pursuant to ORS 197.610 and LOC 50.003.07.16.c, staff has provided notice of the proposed CDC text amendments to the Oregon Department of Land Conservation and Development (DLCD). (Staff incorporated DLCD-suggested edits into the finalized HNA Report.) Staff notified Metro as required by Metro Code 3.07.820(a). V. COMPLIANCE WITH APPROVAL CRITERIA A. CLASSIFICATION OF AMENDMENTS AS A LEGISLATIVE DECISION The proposed Comprehensive Plan amendment requires a "legislative decision" (LOC 50.07.003.16)4. : A legislative decision is generally a policy decision which is up to the discretion of the City Council, but shall: i. Comply with any applicable state law; ii. Comply with any applicable statewide planning goal or administrative rule adopted pursuant to ORS Chapter 197. and iii. In the case of a legislative amendment to this Community Development Code, comply with any applicable provision of the Lake Oswego Comprehensive Plan. 3 Per LOC 50.07.003.11.a,a land use application would be needed to modify a previously-approved PD or PUD to include additional middle housing units.Areas with existing PDs and PUDs were excluded from the analysis of forecasted middle housing units because the requirement to submit a formal land use application serves as a barrier to middle housing development. 4 LOC 50.07.003.16.a.i: "A'legislative decision' is an amendment to the policies, procedures,standards,criteria or map designations of the Comprehensive Plan." Although adoption of the HNA is not an amendment to the Comprehensive Plan policies, it could serve as the basis for that. In addition,the adoption of the HNA as part of the Comprehensive Plan is not a quasi-judicial decision,which is the only other type of classification of land use decisions. Planning Commission Public Hearing Page 8 of 12 LU 23-0023 August 28,2023 The criteria are listed in Applicable Regulations, above, and are addressed in Sections B-D. B. OREGON STATEWIDE PLANNING GOALS Amendments to the Lake Oswego Comprehensive Plan must comply with Oregon's Statewide Planning Goals and Guidelines (OAR Chapter 660 Division 15), when amending the Comprehensive Plan policies (which the HNA does not) and the existing Comprehensive Plan policies (except if they are amending the policies). Findings: The proposed HNA has been prepared pursuant to applicable Statewide Planning Goals and will replace the 2013 HNA, which was adopted as part of the Comprehensive Plan, as follows: Goal 10: Housing—The proposed 2023 HNA was developed consistently with State Goal 10, Housing, and OAR 660-007 and -008. The proposed amendment is to adopt the 2023 HNA as a part of the Comprehensive Plan. Conclusion: The proposed 2023 HNA is consistent with all applicable Oregon Statewide Planning Goals. For the reasons stated above, the proposed 2023 HNA update is established on a factual basis, is consistent with existing City policies, and has been sufficiently coordinated with needed housing in the Metro region, in accordance with OAR 660-008- 030(1). C. METRO CODE Metro Urban Growth Management Functional Plan, Title 7: Housing Choice[MC 3.07.730]: Requirements for Comprehensive Plan and Implementing Ordinance Changes Cities and counties within the Metro region shall ensure that their comprehensive plans and implementing ordinances: (a) Include strategies to ensure a diverse range of housing types within their jurisdictional boundaries. (b) Include in their plans actions and implementation measures designed to maintain the existing supply of affordable housing as well as increase the opportunities for new dispersed affordable housing within their boundaries. (c) Include plan policies, actions, and implementation measures aimed at increasing opportunities for households of all income levels to live within their individual jurisdictions in affordable housing. Findings: These requirements are intended to ensure that Lake Oswego's implementing ordinances include strategies to ensure the production of a diverse range of housing types and increase opportunities for new affordable housing dispersed throughout the City. The 2023 HNA analyzes the future housing needs of the community and will provide the factual basis to later enact policies and strategies to further the City's compliance with Title 7 by developing strategies that promote the development of needed housing through the HPS. This work will lay the foundation for future plan policies, actions, and implementation Planning Commission Public Hearing Page 9 of 12 LU 23-0023 August 28,2023 measures aimed at increasing opportunities for households of all income levels to live within Lake Oswego in affordable housing. Conclusion: To the extent applicable, the 2023 HNA is consistent with Metro Urban Growth Management Functional Plan, Title 7: Housing Choice. D. ORS CHAPTER 197 -COMPREHENSIVE LAND USE PLANNING) ORS 197.296—Analysis of housing capacity and needed housing by Metro, cities outside of Metro and smaller cities (2) (a) A local government shall demonstrate that its comprehensive plan or regional framework plan provides sufficient buildable lands within the urban growth boundary established pursuant to statewide planning goals to accommodate estimated housing needs for 20 years: (B) As scheduled by the commission: (ii) At least once each six years for a metropolitan service district; (D) The 20-year period shall commence on the date initially scheduled for completion of the review under paragraph (a) of this subsection. (3) In performing the duties under subsection (2) of this section, a local government shall: (a) Inventory the supply of buildable lands within the urban growth boundary and determine the housing capacity of the buildable lands; and (b) Conduct an analysis of existing and projected housing need by type and density range, in accordance with all factors under ORS 197.303 ("Needed housing"defined) and statewide planning goals and rules relating to housing, to determine the number of units and amount of land needed for each needed housing type for the next 20 years. (4) (a) For the purpose of the inventory described in subsection (3)(a) of this section, "buildable lands"includes: (A) Vacant lands planned or zoned for residential use; (B) Partially vacant lands planned or zoned for residential use; (C) Lands that may be used for a mix of residential and employment uses under the existing planning or zoning; and (D) Lands that may be used for residential infill or redevelopment. (b) For the purpose of the inventory and determination of housing capacity described in subsection (3)(a) of this section, the local government must demonstrate consideration of: Planning Commission Public Hearing Page 10 of 12 LU 23-0023 August 28,2023 (A) The extent that residential development is prohibited or restricted by local regulation and ordinance, state law and rule or federal statute and regulation; (B) A written long term contract or easement for radio, telecommunications or electrical facilities, if the written contract or easement is provided to the local government; and (C) The presence of a single family dwelling or other structure on a lot or parcel. (c) Except for land that may be used for residential infill or redevelopment, a local government shall create a map or document that may be used to verify and identify specific lots or parcels that have been determined to be buildable lands. (5) (a) Except as provided in paragraphs (b) and(c) of this subsection, the determination of housing capacity pursuant to subsection (3)(a) of this section must be based on data relating to land within the urban growth boundary that has been collected since the last review under subsection (2)(a)(B) of this section. The data shall include: (A) The number, density and average mix of housing types of urban residential development that have actually occurred; (B) Trends in density and average mix of housing types of urban residential development; (C) Market factors that may substantially impact future urban residential development; and (D) The number, density and average mix of housing types that have occurred on the buildable lands described in subsection (4)(a) of this section. (b) A local government shall make the determination described in paragraph (a) of this subsection using a shorter time period than the time period described in paragraph (a) of this subsection if the local government finds that the shorter time period will provide more accurate and reliable data related to housing capacity. The shorter time period may not be less than three years. (c) A local government shall use data from a wider geographic area or use a time period longer than the time period described in paragraph (a) of this subsection if the analysis of a wider geographic area or the use of a longer time period will provide more accurate, complete and reliable data relating to trends affecting housing need than an analysis performed pursuant to paragraph (a) of this subsection. The local government must clearly describe the geographic area, time frame and source of data used in a determination performed under this paragraph. Conclusion: The 2023 HNA Report was prepared based upon these criteria and complies, as discussed within the 2023 HNA Report. VI. RECOMMENDATION Based on the information presented in this report, staff recommends approval of the 2023 HNA as a part of the Lake Oswego Comprehensive Plan. Planning Commission Public Hearing Page 11 of 12 LU 23-0023 August 28,2023 EXHIBITS A. Draft Ordinance A-1 Ordinance 2934, draft July 24, 2023 Attachment 1: Reserved for City Council Findings (not included) Attachment 2: 2023 Housing Needs Analysis, draft July 24,2023 B. Findings, Conclusions and Order [No current exhibits; reserved for hearing use] C. Minutes [No current exhibits; reserved for hearing use] D. Staff Reports D-1 Staff Memo, dated June 15, 2022 for Work Session-1 on June 27, 2022 D-2 Staff Memo, dated January 10, 2023 for Work Session-2 on January 23, 2023 D-3 Staff Memo, dated March 28, 2023 for Work Session-3 on April 10, 2023 D-4 Staff Memo, dated May 12, 2023 for the Planning Commission meeting on May 22, 2023 E. Graphics/Plans [No current exhibits; reserved for hearing use] F. Written Materials [No current exhibits; reserved for hearing use] G. Letters [No current exhibits; reserved for hearing use] Staff reports and public meeting materials that were prepared for these Comprehensive Plan amendments can be found by visiting the project web page for LU 23-0023. Use the link below to visit the City's "Project" page. https://www.ci.oswego.or.us/all-projects (Under "Search" enter LU 23-0023, then press "Enter") Planning Commission Public Hearing Page 12 of 12 LU 23-0023 August 28,2023