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Council Report 09-22-23 CCPH 10-03-23 LU 23-0023 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Subject: Ordinance 2934, 2023 Housing Needs Analysis Update – LU 23-0023 Meeting Date: October 3, 2023 Report Date: September 22, 2023 Staff Member: Erik Olson, Long Range Planning Manager Department: Community Development Action Required Advisory Board/Commission Recommendation ☐ Motion ☒ Planning Commission Recommends Approval ☒ Public Hearing ☐ Denial ☒ Ordinance ☐ None Forwarded ☐ Resolution ☐ Not Applicable ☐ Information Only Comments: The City’s current Housing Needs Analysis was adopted in 2013. ☐ Council Direction ☐ Consent Agenda Staff Recommendation: Conduct a public hearing on Ordinance 2934 to adopt an updated Housing Needs Analysis through an amendment to the Comprehensive Plan Recommended Language for Motion: Move to tentatively approve Ordinance 2934 and direct staff to return on October 17, 2023 with a final version of the ordinance, including findings and conclusions for LU 23-0023. Project / Issue Relates To: Adoption of an updated Housing Needs Analysis to meet the requirements of ORS 197.297 and OAR 660-008-0045 [House Bill 2003 (2019)] ☒Council Goals/Priorities Continue work on the housing production strategy ☒Comprehensive Plan ☐Not Applicable Page 2 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY ISSUE BEFORE COUNCIL The Council will hold a legislative public hearing for LU 23-0023, a proposal to adopt an updated Housing Needs Analysis (HNA)1 to meet the requirements of ORS 197.297 and OAR 660-008- 0045 [Oregon House Bill 2003 (2019)]. (The current HNA was adopted in 2013.) EXECUTIVE SUMMARY The proposed 2023 HNA is a part of the City Council goal to, “Conserve the community’s character, sense of place, and quality of life by planning for change and growth,” and the Council initiative to, “Continue work on key housing initiatives, the housing production strategy, guiding the HACC/Metro project on Boones Ferry Road, and support for other non-profit led housing projects.” The 2023 HNA was prepared in response to House Bill 2003 (HB 2003) (2019) and HB 3155 (2021), now codified as ORS 197.290 and 197.297(1), which require the City to analyze what housing is needed for its current and future residents through an update to the HNA. The Department of Land Conservation and Development (DLCD) has established a timeline that requires the City to adopt an updated HNA by December 31, 2023. The City is then required by ORS 197.290 to develop a Housing Production Strategy (HPS) that outlines what actions the City will take to address its housing needs prior to December 31, 2024. BACKGROUND The City Council first prioritized this work in its 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 proposed 2023 HNA is contained in Attachment 2 to Ordinance 2934 (Exhibit A-1), dated September 21, 2023. 1 The term “Housing Needs Analysis” is used as shorthand in this report to reference the analysis referred to as a “Housing Capacity and Needed Housing Analysis” in ORS 197.297 and as a “Housing Capacity Analysis” in OAR 660- 008-0045. Page 3 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY DISCUSSION The 2023 HNA was developed 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 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 Report Summary The 2023 HNA Report compares the amount and type of land available for future residential uses, as determined by the Buildable Lands Inventory (BLI), with the amount and types of housing units needed, as determined by the Housing Capacity Analysis (HCA). 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 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. 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 in the City by 2043. This includes a deficit of 192 units in low-density zones, 249 units in medium-density zones, and 201 units in high-density zones. Page 4 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY 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:  Re-defining the BLI study area as being coterminous with the City boundary in order to ensure consistency with the HCA;  A more accurate forecast of middle housing units that better considers existing legal agreements or land use approvals that could serve as barriers to the development of middle housing, such as Conditions, Covenants, and Restrictions (CC&Rs), Planned Developments (PDs), and Planned Unit Developments (PUDs); and  Updates to more accurately reflect the amount of residential capacity approved at the former Marylhurst University site. Commission Testimony The testimony before the Commission was in part focused on including a discussion of potential solutions to remedy the projected deficit of housing units outlined in the HNA: The Commission received written testimony from a representative of the Housing Land Advocates noting that the proposed 2023 HNA does not include any proposed solutions on how to remedy the projected deficit of housing units identified in the analysis (Exhibit G-1). … Commission Finding: … The Commission finds that it is not appropriate for the 2023 HNA to include strategies to remedy the projected deficit in housing units, as such strategies are intended to be identified through the subsequent development of a Housing Production Strategy (HPS) as required per Oregon House Bill 2003 (2019) [now codified as ORS 197.290] and OAR 660-08-0050. The Commission finds that it would be premature to evaluate any solutions given that the HPS is the statutory and administrative rule required forum for identifying solutions related to meeting future housing needs, which may include amendments to the Community Development Code, Comprehensive Plan amendments, financial and funding mechanisms, or other potential housing production strategies. The Commission notes that the statutory and administrative rule requirement for the City to produce an HPS is relatively new, and was not a requirement when the 2013 HNA was adopted. Thus, while it may have been appropriate to include strategies to remedy a projected deficit in housing units within the HNA document itself in previous years, the new requirement to develop an HPS will provide the City with an opportunity to produce a much more detailed and refined set of strategies to address the housing needs identified in the HNA. [Planning Commission Findings, Conclusion and Order, pg. 2-3 (Exhibit B-1)]. Page 5 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY This testimony also included a request that City staff modify the findings for Oregon Statewide Planning Goal 10 - Housing: The City received written testimony from a representative of the Housing Land Advocates with a request that City staff modify the findings for Oregon Statewide Planning Goal 10: Housing to include a summary of the projected deficit of housing units in the City. Commission Finding: The Commission notes that the HNA Report includes a reconciliation of the anticipated future housing needs identified in the HNA and the land supply identified in the Buildable Lands Inventory. 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. [Planning Commission Findings, Conclusion and Order, pg. 3 (Exhibit B-1)]. Commission Modifications to Draft 2023 HNA At the hearing, the Commission noted that the projected growth identified in the 2023 HNA was based on the forecasted 2043 population for the City included in the 2021 Coordinated Population Forecast from Metro for all cities in the region. The projected annual growth rate in Metro’s 2021 Coordinated Population Forecast for the City was .05% per year, resulting in an increase of 411 residents over the course of the 20-year planning horizon. This equates to a projected population increase of approximately 1% over that 20-year timeframe. The Commission found that the growth rate for the City contained within the 2021 Metro Coordinated Population Forecast was not consistent with recent housing trends. On page 5, the HNA states that, “Since 2000, Lake Oswego has grown by nearly 6,300 people within the UGB, or 18% in 23 years.” The Commission found that the projected 1% growth rate between 2023-2043 was significantly lower than the 18% population growth in the City over the last 20 years, and expressed skepticism regarding the accuracy of the 2021 Metro Coordinated Population Forecast. In order to address this concern, the Commission requested that the 2023 HNA include a footnote stating that the 2021 Metro Coordinated Population Forecast was likely under- projecting future population growth in the City: “The projected growth and housing need presented in this report conforms to the statutory approach to completing a Goal 10 needs analysis. To comply with state rules, the analysis relies on estimates of current population from the Portland State University Population Research Center (PRC) and projections of future growth from the most recent Metro distributed forecast. The forecasted growth rates from Metro are very low in comparison to rates experienced during the past 20 years and low in comparison to Page 6 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY projected rates in other parts of the region and state. The City's population increased by about 18%, with an average annual growth rate of about 1% between 2000 and 2020 per year. During the next 20 years, forecasted growth is projected to be a total of 1%, with an average annual growth rate of just 0.05% per year. Many community members in Lake Oswego, including members of the project Task Force, as well as members of the City's Planning Commission and City Council, have questioned the accuracy of the projected growth rates, but no contrary expert testimony of the population forecast is presented. To the extent the City grows faster than the growth rates predict, the deficit of land available to accommodate housing over the long term will be more acute and the City will consume remaining buildable land more quickly, potentially running out of buildable land within several years. Per ORS 197.297, the City is required to adopt an updated HNA at least once every six years; thus, the City will have an additional opportunity in 2029 to correct the population forecast, if the projections in the 2023 HNA are notably different than observed trends. It will be important for the City to coordinate closely with Metro as it updates its growth rates and to continue to monitor actual growth patterns, as well as the supply of buildable land in the City. To the extent growth occurs at a faster rate than projected, the City will need to identify and implement strategies to address a potential shortage in available land for housing in the near term.” One Planning Commissioner expressed dissenting views to those expressed above, noting that the projections in the BLI regarding the buildability of partially-vacant land involved some level of subjectivity and may not fully reflect the real-time availability of those properties for redevelopment throughout the 20-year analysis period. This Commissioner also expressed skepticism regarding the assumptions in the 2023 HNA that 1.5% of residential properties would redevelop as middle housing, stating a preference for using the highest middle housing redevelopment rate allowed under state law – a 3% redevelopment rate – under the rationale that citizens in Lake Oswego would like to see less development. (See Planning Commission Minutes, Exhibit C-1). FISCAL IMPACT None. RECOMMENDATION Staff recommends that the City Council tentatively approve LU 23-0023 as recommended by the Planning Commission, and direct staff to return on October 17, 2023, with a final version of Ordinance 2934, including findings and conclusions. 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 September 21, 2023 (Supersedes version dated 6/24/2023) Page 7 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY B. Findings, Conclusions and Order B-1 Planning Commission Findings, Conclusions and Order, September 11, 2023 (see Attachment 2 of Ordinance 2934 dated July 24, 2023) C. Minutes C-1 Planning Commission – Public Hearing August 28, 2023 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 D-5 Staff Report, dated July 24, 2023 for the Planning Commission hearing on August 28, 2023 E. Graphics/Plans [No current exhibits] F. Written Materials [No current exhibits] G. Public Testimony G-1 J. Dahlquist, dated August 28, 2023 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”)