Regional Housing Analysis
Issues and Options
Table of Contents
Population and Employment trends
1
Historical and projected population trends
Current and projected employment trends
Population growth projected by income category
Housing Market Conditions
Housing Indicators
Leveraging Ability by Income Category
Projected Housing Market Conditions V. Existing
Housing and Economic Development Programs
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Morro Bay Housing Analysis
Governmental Constraints
Local Land Use Controls
Growth Controls
Building and Housing Codes
Permit Processing Times
Permit Processing and Development Fee
Non- Governmental Constraints
Land Costs
Site Improvement Costs
Construction Costs
Finance Charges
Sales and Marketing
Taxes
Profit
Local Housing Resources
Vacant Land Assessment
Financial and Administrative Resources
Review of existing Policies and Programs
Proposed Constraint Mitigation
Proposed Strategies
State and Local Efforts
References
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POPULATION AND EMPLOYMENT TRENDS
HISTORICAL AND PROJECTED POPULATION TRENDS
The community of Morro Bay which according to the General Plan, increasingly
serves as a tourist and retirement destination, has experienced relatively little growth in
the past 20 years (Figure 1). Over the past two decades, the population has increased
from 9,064 to 10,350 an increase of just over 1,000 residents. This equates to a growth
rate of less than 1% per year for the last 20 years. The rate of growth within the
community of Morro Bay has remained low for two main reasons:
1. The physical location and geography of the city. Morro Bay is nestled between
coastal hills and the shoreline which is made up of sensitive coastal habitat.
2. The strong desire within the community to preserve the quality of life that served
as the motivation for many to move to Morro Bay in the first place.
Population Trends
50,000
Pismo Beach
Morro Bay
San Luis Obispo
45,000
40,000
Population
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1980 1984 1986 1988 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Figure 1. Population Trends.
Source: U.S. Census Bureau, Census 2000 , www.census.gov
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Pismo Beach (of similar size) has experienced greater growth than Morro Bay
over the past two decades. The consistent slow rate of growth in Morro Bay may be
attributed to the limited amount of developable land in the City. According to Morro
Bay’s existing General Plan, the City has allotted 200 acres for future development, with
30 acres to be designated for commercial land uses. With limited room for new
development to occur, Morro Bay will remain the quaint tourist and bedroom community
that currently exist today.
CURRENT AND PROJECTED EMPLOYMENT TRENDS
Morro Bay was once considered a major port-town for the import of commercial
goods into the nation. However, unlike port cities such as San Francisco and Long Beach,
Morro Bay has grown into a quiet fishing town and tourist destination. The City has
experienced only small amounts of growth with little or no change in its service industry;
therefore, employment trends have remained consistent for the past few decades. Nearly
12% of employment is in retail trade, which predominantly caters to the weekend traveler
and holiday tourist. Similarly, almost 15% of Morro Bay’s industry is comprised of
overnight accommodations (hotels and motels) and food services. The beautiful natural
scenery that surrounds the city attracts thousands of travelers to stop and enjoy Morro
Bay’s surrounding scenery along the Pacific Ocean. Along the City’s water front is the
Embarcadero, which supports a variety of restaurants, gift shops, and novelty stores.
These attractions employ a high percent of the year-round service industry that Morro
Bay is so greatly known for, and because of this, the City will most likely remain a
popular stop-over destination for “pass through” tourists. With little room for future
growth, employment trends should remain as consistent as they have in the past.
POPULATION GROWTH PROJECTION BY INCOME CATEGORY
Almost 50% of all households in the City are comprised of non-family residences.
These non-family households have an average combined income of $34,380. In
comparison, only 37% of all households in the County of San Luis Obispo are of nonfamily residences (Figure 4) (U.S. Census Bureau, 2000 Census data). This indicates that
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an above average amount of non related people in Morro Bay are forced to live together
because of the relatively high cost of living in proportion to wage earnings. This problem
is compounded due to the fact that only a small percentage of homes will be built within
the City’s limits, and very few homes that will be built will be considered affordable.
With the limited types of industry employment that Morro Bay offers, the City attracts
elderly people that don’t necessarily rely on high paying jobs, but rather they chose to
live in Morro Bay because of the quiet “laid back” atmosphere. Currently, the majority of
occupants are low income renters and high income retired home owners (U.S. Census
Bureau, 2000 Census data). In 2000, 40% of the homes in Morro Bay were selling for
$200K-$300K, and 14% were selling $300K-$400K (U.S. Census Bureau, 2000 Census
data). Since then the City has experienced a dramatic increase in the lack of affordable
homes. The City is attracting second home buyers from areas such as the Bay Area,
Silicone Valley, and Southern California. Many of these people are from high income
careers and are looking to purchase second homes for retirement. These groups are able
to chose where they wish to live without the same concern of “affordability” that restricts
the local residences.
In the past, Morro Bay was considered an affordable place to live, especially in
comparison to Southern and Northern California beach communities. Recently, Morro
Bay has become an unaffordable place to live (especially to the local work force), similar
to the rest of the County. Middle class blue collar workers that were once able to afford a
single-family home in Morro Bay are forced to look elsewhere or stay in Morro Bay and
rent. With the limited amount of jobs in the area, Morro Bay will see less and less middle
class families moving to the area, and instead, higher income elderly people would be
moving to the City for retirement.
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HOUSING MARKET CONDITIONS
Morro Bay has a total of 6,251 housing units and a total of 4,986 households,
which equates to 4,986 occupied units and 1,265 vacant units. The relatively high
vacancy rate is attributed to the large percentage of houses that serve as vacation homes
or part time residences. Tables 1 and 2 provide a summary of the vacancy rates along
with the various reasons.
Table 1: Housing Unit Summary
Total Housing Units
Occupied Units
Vacant Units
6,251
4,986
1,265
Source: U.S. Census Bureau, Census 2000 Summary File 1
Table 2: Reasons for Vacancy
For Sale
For Rent
Seasonal Use
2.7%
7.7%
77.5%
Source: U.S. Census Bureau, Census 2000
The current high rate of vacancy has many social implications as well. The most
immediate affect is the shortage in available housing stock that is the result of people
from outside areas buying up housing. This in turn results in a relatively high rental rate
at prices that are above the average wage earned for the area. This is the reason why over
38.7 % of renters pay over 35 % of their income for rent and 34.4 percent of home
owners pay less than 15 % of their income as rent (U.S. Census Bureau, 2000 Census
data). This disparity between owners and renters is highly visible in Figure 2, which
illustrates the vast differences that exist between the relative amount that owners and
renters pay for their housing.
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Living Costs as Percentage of Income
40.0%
Owner costs as percentage of income
35.0%
Rent as percentage of Household
income
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Less than
15%
15-19%
20-24%
25-29%
30-34%
35% or
more
Figure 2. Living Costs as Percentage of Income
Source: U.S. Census Bureau, Census 2000
Using the State Department of Housing and Community Development definition
of overpayment (which is where more than 25% of household income is spent on
housing), over half of all renters overpay for housing. This wide variation in housing
costs as a percentage of income creates a skewed owner to renter ratio. Over 55% of
housing units are owner occupied and 44.4% of housing units or renter occupied. Of the
owner occupied units, 33% of them are owned by residents 65 years or older (U.S.
Census Bureau, 2000 Census data). Morro Bay’s General Plan expresses concern over
this segment of the population even though they control over half of the housing and
generally pay a smaller proportion of their income housing costs.
While Morro Bay has maintained a very slow growth rate over the last two
decades, they have not met the previous housing allocation. The 1988 General Plan called
for an additional 622 units to be built between 1991 and 1997. Table 3 depicts the ratio of
housing allocated for each income category. The housing allocation called for the
majority of the houses to be in the above moderate price range. This is in light of the fact
that the average household income is in the low income range. This type of housing
allocation is yet another factor in the high rental rate, as well as the high over payment
rate.
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Table 3. Housing Allocation Ratio
Income Groups
Housing Units
Percentage
Very Low
0
0%
Low
69
11%
Moderate
174
28%
Above Moderate
379
61%
Total
622
100%
Source: Morro Bay General Plan, 1988.
During this time however, only 182 building permits were issued for the
construction of residential units. While they did not meet their initial goal, an additional
447 building permits have been issued since 1997, bringing the total number of units up
to 629. This brings Morro Bay up to its 1997 goal, approximately four years behind
schedule. In addition, the vast majority of all building permits issued were for singlefamily homes, which demonstrates an overall lack of interest among developers to
develop anything other than single-family dwellings. Figure 3 illustrates the number and
rate at which building permits have been issued along with the proportion that have been
single family homes.
100
Total Permits
90
Single Family Permits
80
70
60
50
40
30
20
10
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Figure 3. Building Permits
Source: Construction Industry Research Board, 2001
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In order for Morro Bay to meet the current housing allocation, the amount of
building permits issued would need to more than double. The new allocation would
require an additional 778 units by the year 2008. However, the previous 11 years have
only seen 629 residential building permits issued.
HOUSING INDICATORS
In order to consider future housing conditions, it is necessary to establish key
housing indicators. These indicators can give clues as to steps that are necessary in order
to plan for future housing opportunities. The indicators chosen to identify housing
conditions are the number of family households in relation to the number of non family
households along with their perspective sizes, the number of households with children
under the age of 18 years old, and the average population per household and family. All
of these indicators will be compared to those of San Luis Obispo County, as well as with
California.
There generally exists a rather large margin between the number of family and
non-family households within the State, as well as within San Luis Obispo County.
However, this margin is significantly smaller in Morro Bay. Morro Bay has
proportionally fewer family households and proportionally a greater number of nonfamily households, which is clearly demonstrated in Figure 4 below.
Family Households
Nonfamily Households
70
60
50
40
30
20
10
0
California
SLO County
Morro Bay
Figure 4. Total Family and Non Family Households
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Source: U.S. Census Bureau, Census 2000
The large percentage of non-family households can be attributed to the high cost
of rent. Since most residents cannot afford the average cost of living, they are forced to
live in non-family households by taking on room mates. The total number of households
with children under the age of 18 years old also reflects the amount of family households
and can also be relevant to the overall percentage of retired residents within Morro Bay.
Morro Bay has a much smaller percentage of households with children under 18 years old
than both San Luis Obispo County and the State of California. Figure 5 illustrates the
number of families with children under the age of 18 in relation to the County and the
State.
Families with Children Under 18 Years of Age
California
SLO County
Morro Bay
40
30
20
10
0
California
SLO County
Morro Bay
Figure 5:
Source: U.S. Census Bureau, Census 2000
Only 16.7% of households in Morro Bay have children under the age of 18, while
there are 35.8% state-wide. From this, it may be assumed that Morro Bay has a much
higher percentage of retired residents or other non-traditional households. The retired
residents have the ability to afford higher priced housing that is not within the price range
of most families with children under the age of 18 years old. If this trend continues
families with children will be completely priced out of the housing market.
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LEVERAGING ABILITY BY INCOME CATEGORY
Overall, most people within Morro Bay do not have much leveraging ability to
afford housing. For people living and working in the area, housing is out of proportion
with the income, and as a result the average person of working age cannot easily afford
housing. Most of the housing market is open to people of retired age, which already own
a proportionally high percentage of housing in Morro Bay (see figure 6).
Percentage of Homeowners 65 and older
California
SLO County
Morro Bay
18
16
14
12
10
8
6
4
2
0
Figure 6. Percentage of Homeowners 65 and older
Source: U.S. Census Bureau, Census 2000
In addition to a high proportion of housing being owned by people 65 years and
older, the problem of affordable housing is compounded by the fact that the median
household income is only $34,379. This combined with the fact that the average house
price is around $300,000 leaves very little options available to the median income earner.
Table 4 below demonstrates mortgage payments affordable to the median income earner.
According to the State Department of Housing and Community Development,
over payment occurs if more than 25% of the household income is spent on housing. At
this rate, the maximum that should be spent on housing by a median income earner
without overpayment is approximately $716. This means that the most that could be
borrowed is between $100,000 and $125,000, far below what would be needed to acquire
an averaged priced home in Morro Bay.
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Table 4. Monthly Mortgage Payment
Monthly Mortgage Payment
Amount
Borrowed
$50,000
$55,000
$60,000
$65,000
$75,000
$100,000
$125,000
$150,000
$175,000
$200,000
Interest Rate
6%
$268
$295
$332
$390
$450
$600
$749
$899
$1,049
$1,199
7%
$300
$330
$360
$432
$498
$665
$832
$998
$1,164
$1,331
8%
$333
$404
$440
$476
$550
$734
$917
$1,101
$1,284
$1,468
9%
$402
$443
$483
$523
$603
$805
$1,005
$1,207
$1,408
$1,609
10%
$438
$483
$527
$570
$658
$878
$1,097
$1,316
$1,536
$1,755
Source: Morro Bay General Plan, 1998
In conclusion, the prospects for the average person owning a home in Morro Bay
are not good. A household earning the median income would have to establish a down
payment of around two-thirds the price of an average priced home in order to be able to
afford it.
PROJECTED HOUSING MARKET CONDITIONS
VS. EXISTING HOUSING AND
ECONOMIC DEVELOPMENT PROGRAMS
The current housing market and existing employment are severely out of balance
in Morro Bay. This is primarily due to the fact that jobs local tend to be on the low end of
the pay scale, while houses remain to be on the high end (when considering
affordability). The City is not experiencing a greater supply than the demand for homes.
The housing market condition and employment trends will most likely never be in
balance in Morro Bay, and this is partially because of the high majority of the population
which is retired. Homes are still being bought at the recent increased cost, and as a result,
the affordability of homes and the wage of employment are becoming further out of
equilibrium.
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With the limited amount of employment in the region, Morro Bay may become an
even more desirable destination for those seeking retirement. Low employment often
equals low cost of living, low populations and low volume traffic conditions, this is true
in Morro Bay with the exception of the low cost of living. Many cities in the County such
as Atascadero and Paso Robles will experience a significant increase in development of
residential units, where Morro Bay will not. As previously stated, Morro Bay has limited
growth potential because of geography and environmental constraints. As a result, the
City will continue to experience a steady population, and because of the recent increase
in housing costs fewer young families will be attracted to the area, while retirees may be
even more attracted to the area than in the past.
MORRO BAY HOUSING ANALYSIS
There are many governmental and non-governmental constraints on the
development of housing in San Luis Obispo County. These constraints can add to the
burden of meeting the County’s housing allocation, which is divided among the cities and
unincorporated area’s within the County. The City of Morro Bay, is required to take on
778-housing units of the currently proposed 18,035 housing units allocated to the County
as a whole. This will involve unprecedented development within the city. In considering
such growth, it will be paramount to determine both the governmental and nongovernmental constraints that can impede the development of housing within the city.
GOVERNMENTAL CONSTRAINTS
The first part of the constraint analysis will involve identifying any associated
governmental constraints pertaining to Morro Bay. While there is no doubt that
governmental constraints can act to inhibit housing, governmental constraints are also
areas that the City has the ability to influence and make necessary changes. The City of
Morro Bay has identified five major governmental constraints (1995 Housing Element
and Mike Prater, Associate Planner, Personal Interview, November 13, 2002). These five
constraints include: 1) Growth controls; 2) Local land use controls; 3) Building and
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housing codes; 4) Permit processing times; and 5) Permit processing and residential
development fees. The first of these constraints discussed is local land use controls,
because it determines not only where development is to occur, but what type of housing
will be located within the city.
LOCAL LAND USE CONTROLS
Local land use controls determine the size of lots for housing, where the lots
should be located, density of each lot, and the required setbacks for houses upon the lot.
In order to embrace some of the unique attributes of the City, Morro Bay has allowed for
flexibility in some of its land use regulations. Morro Bay has allowed for a wide degree
of variation from the standard minimum of 6,000sq feet for single-family lots. This helps
to accommodate lots created to serve as second homes before the implementation of the
city’s zoning regulations. The setbacks on these smaller lots are in turn smaller, thereby
allowing housing to occur on many different sizes of lots.
Another type of land use control used by Morro Bay is height restrictions and
large setback requirements. These restrictions intend to balance the owners’ rights to
develop and the public’s right to enjoy the coast, while protecting the natural
characteristics of the coast. While the zoning requirements serve to benefit the public’s
interest and the coastal environment, they are not particularly stringent and therefore do
not impede on the development of the either market rate or affordable housing. The
flexibility of the City’s zoning requirements intends to promote the development of
affordable housing. For example, in order to encourage and reduce the development costs
of low-income projects, the City has reduced the requirements for off street parking. This
allows low-income housing to occur at a higher density on smaller lots at a lower cost
than would normally be possible if more stringent parking requirements were present.
GROWTH CONTROLS
Growth controls are rather common throughout the Central Coast, and Morro Bay
is no stranger to this phenomenon. Measure F, which was passed by the voters of Morro
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Bay in 1984 still reins control over development within the City. The voter-approved
measure limits the amount of new residential construction per year to an average of 70
units. While this measure does limit that amount of new residential units (thereby causing
a constraint), it does give priority to affordable housing projects. The higher the
percentage of affordable housing within a development, the more priority it will be given.
Affordable housing project may be moved to the top of the allocation list, which
guarantees that they will be built that year resulting in a further reduction of
developments costs.
The growth restriction while giving priority to affordable housing projects, does
constitute a major constraint in meeting the current housing allocation for Morro Bay.
The current housing allocation will require an annual average of 104 new units. However,
Measure F limits the annual average to 70 units. This means, that in order for Morro Bay
to meet its new housing requirements, it will have to lift the growth control or at least
raise the limit to allow for 104 new building permits annually.
BUILDING AND HOUSING CODES
The Uniform Building Code, which determines the minimum residential
construction requirement for the State of California serves as the framework for Morro
Bay’s Building Code. The purpose of this code is to provide safe housing and is usually
enforced on a complaint basis. When the City receives a complaint about a violation,
there is an attempt to mitigate the problem while allowing property owners reasonable
time and flexibility to comply with the building codes. By allowing the owner reasonable
time to comply, the City attempts to balance the need for safe housing against the
potential loss of affordable housing that could result from overly strict enforcement.
Since the City of Morro Bay has instituted a flexible practice with enforcing the City’s
building codes, there is no indication that building rehabilitation efforts have been
unnecessarily restricted or that the building codes pose a significant constraint to housing
production.
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PERMIT PROCESSING TIMES
All developments within the State must accept permit-processing times as part of
the price of doing business. The permit processing times for the Morro Bay are
comparable to that of other cities along the Central Coast. The average time required for
the processing of building permits is currently about 37 days. There is however, an
attempt made by the City to accelerate the processing times required for development
proposals that include affordable housing.
The current permit processing times are likely to remain consistent. The only way
to significantly reduce permit processing times would be to eliminate the Coastal
Development Permits (CDP’s) that are currently required for single-family units.
Attempts to accomplish this in the past have been meet with little success. It is therefore
concluded that the current permit processing times do not impose a significant constraint
to the development of housing, affordable or market rate.
PERMIT PROCESSING AND DEVELOPMENT FEES
Almost all cities in California including Morro Bay subscribe to the building
permit fees that are set by the International Conference of Building Officials and are
listed in the Uniform Administrative Code. The purpose of such fees is to recover the
direct costs of reviewing plans and conducting site inspections associated with the
development of the property. The Residential Building Fees, which include connection
fees for both water and sewer, are comparable to other cities within the region and are
based on the cost of providing such services. While the required fees do add slightly to
the cost of development, they are necessary for the financial well-being of the city and
are therefore not considered a major constraint to the production of housing.
NON-GOVERNMENTAL CONSTRAINTS
This section of the analysis will examine constraints to the development of
housing that are not directly related to the government. Typically, these types of
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constraints have to do with economic factors that are driven by the housing market.
Seven non-governmental constraints have been identified by Morro Bay. These seven
constraints include:
1. Land costs
2. Site improvement costs
3. Construction costs
4. Finance charges
5. Sales and marketing
6. Taxes
7. Profit
The first constraint discussed below is land costs, which happens to be the most
inhibiting to the development of housing and in particular affordable housing.
LAND COSTS
As previously mentioned, land costs are market driven, and tend to pose a major
constraint on the development of housing in Morro Bay. High land prices force the final
cost of housing to be out of the price range for many consumers. The price of land in
Morro Bay is extremely high for several reasons. Among the reasons are the limited
availability of suitable land, and the coastal location of the City, which makes it a
desirable place to live thereby, increasing the amount of money that people will be
willing to spend on the land.
The average cost for a lot in Morro Bay is approximately $300,000. This price
makes the act of merely acquiring a lot impossible for many potential buyers. This
problem is compounded by the fact that land within and surrounding the city will only
become more scarce and valuable. The City has taken steps, such as requiring developers
to pay an in-lieu fee to an affordable housing fund, when developing affordable housing
is not feasible, to thwart the high cost of housing. However, there is still an extreme
shortage of affordable housing. It is therefore concluded that the high cost of land does
indeed constitute a significant constraint for the development of housing in Morro Bay.
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SITE IMPROVEMENT COSTS
These costs are associated with the act of preparing the land so that it is
possible to develop the lot in accordance to established codes and standards. All cities in
California may require such improvements including: the construction of roads, sewer,
water and other utilities in order to develop a piece of property. The City of Morro Bay is
no exception. Gutters, curbs, and sidewalks are to be placed along every new lot that is
significantly altered. However, since these minor improvements are no more stringent
than what might be imposed by other cities, it is concluded that the site improvements
requirement imposed by Morro Bay do not impose a significant constraint on the
development of housing.
CONSTRUCTION COSTS
Construction costs in many jurisdictions are apparent constraints on the
development of homes, especially for working class homes. This may be true in Morro
Bay; however, it is not one of the primary development constraints as are vacant land
availability, topography, and land costs. In Morro Bay, residential construction costs
currently range from $35 to $65 per square foot for average quality construction, which is
typical in most areas throughout the region. One of the primary constraints with
construction costs is related to the expansive soils in Morro Bay. These soils necessitate
more extensive footings for dwelling units, which may have a hand in increasing
construction costs. For this reason, multiple-family dwelling units such as apartments
can generally be constructed for slightly less than single-family residences simply
because these footings would support a greater area and number of occupants.
FINANCE CHARGES
Financing for residential development projects is most often available through
local banks and other financial institutions. In the past, financing was difficult because of
the sluggish real estate market; however, it may be assumed that this is not true today as
we are currently in the midst of the fastest growing real estate market in decades. We
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would also assume that banks would be less reluctant than in the past to loan on projects,
although it may be true that they are still hesitant to loan on projects that are related to
providing homes for the working class. Prior to five years ago when the central coast was
considered an affordable place to live and development, finance charges may have been
one of the more detrimental constraints on growth, but today this constraint isn’t as
limiting as some of the more apparent ones such as land availability and land costs.
SALES AND MARKETING
In 1995, the median price of housing in Morro Bay was $225,000, and the buyer
of a home at this cost would be required to pay approximately $13,500 for sales and
marketing fees such as advertising, title insurance, escrow fees, and sales commission
upon the close of escrow. Today, the median has increased by fifty percent and such fees
would be increased by around $8,000. This constraint primarily relates to families
attempting to purchase affordable homes (in which very few, if any, exist in Morro Bay).
As previously stated, the majority of the recent buyer market is of the older/ retired class
wishing to move to Morro Bay as a place to retire, and in doing so, have the money to be
able to afford such fees. Sales and marketing has been a constraint in the past and still
remains to be a constraint in the present, however, it is would not be considered a
significant constraint as to why the City can’t supply a considerable amount of more
homes (especially affordable homes).
TAXES
Taxes in the past, present and future have proved to be a constraint in any form of
development. Currently, for a home in Morro Bay bought for $325,000, the annual tax
bill would be $3,400.
PROFIT
In regards to the development of affordable housing, profit constraints have
proved to be one of the most discouraging reasons for a developer to build such units.
This is because developers require a certain return on their investment prior to lending,
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and banks often require that a developer must show a 15% profit margin after paying off
all costs associated with the development of a project. Because of this, developers are
discouraged to build affordable units because they tend to have a less profit margin than
more expensive housing units do. Because of the current strength in the housing market,
developers are having no problem reaching the desired 15% profit margin. We would
assume that constraints related to profit margins rarely exist in the development of all
kinds of dwelling units in Morro Bay, especially when compared to some of the
aforementioned constraints.
LOCAL HOUSING RESOURCES
This section illustrates the potential available land for growth within the City’s
limits, through personal interviews and our available literature sources: Morro Bay’s
1995 Housing Element and the local coastal plan. In addition, this section analyzes any
existing financial and administrative resources available, specifically in regards to
providing affordable housing within the City.
VACANT LAND ASSESSMENT
On November 12, 2002 we interviewed Associate City Planner, Mike Prater regarding
local housing resources. Mr. Prater identified only one current site of vacant land that
would be suitable for the development of future housing within the city. This consisted of
a recently abandoned schoolyard that appeared to be roughly 15 acres. Mr. Prater
mentioned that there was an additional site that had the potential to provide additional
housing units (a former Texaco gas station), but he gave very little incite as to the
location and size, and practicability in development of such a site. As stated throughout
this document, little available vacant land exists in Morro Bay; therefore, future
expansion of the City would primarily occur in the form of infill development. On
Monday, November 18th, city planners along with developers will be performing
reconnaissance on suitable sites for future development within the City (both vacant and
underutilized sites), as part of the City’s housing element update, which is in response to
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the recent housing allocation provided by the State Housing and Community
Development Agency.
FINANCIAL AND ADMINISTRATIVE RESOURCES
Morro Bay has adopted a policy that requires at least 10% of the units within a
new development project or subdivision (10 units or more) to be considered affordable. If
this is deemed an unachievable task on the developer for a particular project, the
developer is required to either place the required 10% of affordable homes elsewhere
within the city, or, pay in-lieu fees that would go toward an affordable housing fund. The
determinacy is developed through conducting a feasibility study on whether or not
affordable homes can be built within the project. The feasibility study determines
whether or not 10% of the homes within a project can be made affordable. If the study
reveals that it is not achievable, it then analyzes how compensation shall be met whether
through relocation elsewhere or by paying in-lieu fees.
Another way to provide working class housing is through the determination of
feasible locations for low-income housing conversions. All housing elements are required
to identify low-income units that have the potential to convert to market rate within 10
years, while analyzing the costs of preserving “at-risk” units versus replacing them. In
1995, Morro Bay had concluded that no projects that are subsidized through public funds
or built through government incentives were identified as “at-risk” of converting to
market rate units. However, through Section 8 rent assistance programs provided by the
San Luis County Housing Authority, rental assistance subsidies are provided to 41
families in Morro Bay to help defray the cost of market rate rental housing. In 1995, the
waiting list for Section 8 housing in the City had been closed for 2 years, and it has been
identified in the City’s Housing Element that there is a substantial number of families that
would participate in the program if more funds were available. Mr. Prater also revealed
that People Self Help Housing has provided 119 units for affordable housing; however,
all of those units are non-owned rental units. According to Mr. Prater, there is a
significant need for more owner-affordable housing units in the city.
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REVIEW OF EXISTING POLICIES AND PROGRAMS
This section examines the policies and programs of the current Morro Bay
Housing Element. These policies and programs are intended to guide the City in creating
fair housing opportunities for all income groups, while providing a housing supply to
meet future demand.
The policies and programs of the existing Housing Element continue to be
applicable in identifying and providing for the housing needs of the community. The
existing Housing Element appropriately identifies the importance of affordable housing,
as well as special housing needs of the population such as the elderly, which makes up
the majority of the population. Housing conditions in the City has remained consistent
over the past few decades (with little flux in growth), and in general (with few requiring
mitigation), the existing policies and programs of the adopted 1995 Housing Element
should be sufficient in continuing to guide the use and development of housing that will
be adequate as the City of Morro Bay and surrounding areas expand due to the recent
increase in population on the Central Coast.
Conversely the existing Housing Element policies and programs fail to identify
appropriate construction materials and design approaches which can assist in creating
continuity in the area with regards to future development, especially when providing for
more affordable housing units.
PROPOSED CONSTRAINT MITIGATIONS
The City should focus on reconstructing Measure F, which was passed by the
voters of Morro Bay in 1984. The voter-approved measure limits the amount of new
residential construction per year to an average of 70 units. This Measure creates a
significant constraint on the ability of Morro Bay to meet the State’s housing needs
allocation of 778 units over the next five years. Measure F constitutes a major constraint
in meeting the current housing allocation for Morro Bay. The current housing allocation
will require an annual average of 104 new units. This means that in order for Morro Bay
to meet its new housing requirements, it will have to lift the growth control or at least
raise the limit to 104 new housing units. While this measure does limit that amount of
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new residential units, it does give priority to affordable housing projects. The higher the
percentage of affordable housing within a development, the more priority it will be given.
Affordable housing project may be moved to the top of the allocation list, which will
guarantee that they will be built that year resulting in a further reduction of developments
costs.
There also needs to be more incentive in providing feasible locations for lowincome housing conversions. Morro Bay has a limited amount of land on which to build
new affordable housing units, therefore identifying land which could be converted to low
income housing would be a substantial step towards solving the affordable housing
problem.
In 1995, Morro Bay had concluded that no projects that are subsidized through
public funds or built through government incentives were identified as “at-risk” of
converting to market rate units. This is because of the mandated amount of time which
designated units are required to stay affordable.
Section 8 rent assistance programs provided by the San Luis County Housing
Authority, are provided to 41 families in Morro Bay to help defray the cost of market rate
rental housing. In 1995, the waiting list for Section 8 housing in Morro Bay had been
closed for 2 years, and it has been identified in the existing Housing Element that there is
a substantial number of families that would participate in the program if more funds were
available. The updated housing element should address funding sources to assist Section
8 housing units, as well as develop policies and programs addressing the importance of
such funding sources. Additionally, People Self Help Housing has provided 119 units for
affordable housing; however, all of those units are non-owned rental units. There is a
significant need for more owner-affordable housing units in the city.
In conclusion, the following mitigations may be applied to existing policies and
programs to help plan for the future housing needs of the City.
 Adjust Measure F to allow for 104 units per year, while continuing to give
priority to the development affordable housing units;
 Identify areas where redevelopment and infill projects could occur. Develop
policies and programs to address the importance in redeveloping underutilized
areas where additional housing units can be developed;
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 Strive to obtain additional Section 8 funding and more support for Peoples Self
Help Housing and, other similar organizations;
 Work with Peoples Self Help Housing and similar organizations in developing
owner-affordable housing units in the City of Morro Bay;
 Create design and materials guidelines for all future development in the City.
PROPOSED STRATEGIES
There are some basic strategies that Morro Bay can use to help meet its regional
housing allocation. Since Morro Bay is bounded by natural land constraints, the strategies
are going to focus on ways to implement infill development. As mentioned earlier,
identifying appropriate infill and redevelopment areas is crucial for the area to meet its
housing needs. This means that it is important that the new housing element be geared
towards implementing infill and redevelopment rather than expanding outward.
The General Plan can be a powerful tool, both politically and logistically, so it can
therefore be a valuable asset to successful infill development. If potential infill projects
closely resemble what is spelled out in the General Plan there will be less delay in getting
them approved, as well as less of a need for extensive General Plan amendments.
In addition to having a General Plan that promotes infill and redevelopment,
another important strategy is to have flexible zoning standards. Since most infill
developments do not fit the mold of traditional developments, it is necessary to allow for
a certain amount of flexibility in the zoning code. If a city rigidly applies zoning
standards to every infill development, most, if not all infill developments will not be
approved. The easiest way to be flexible on zoning standards is with parking
requirements. Since most infill developments do not have adequate space for parking, it
is necessary for the city to reduce the number of parking spaces required for infill
requirements from that which would normally be required for more traditional
developments.
Morro Bay has already done this in order to promote the development of
affordable housing. By reducing the requirements for building, the City plans to promote
the development of affordable housing. This same philosophy needs to be applied to all
infill development not just affordable housing.
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STATE AND LOCAL EFFORTS
The State’s efforts to address the housing shortage are well intended however; it
is the opinion of the local governments that the State is misinformed about the specifics
of the San Luis Obispo area and the jurisdictions therein. The State attempts to be
equitable to every county in the State by distributing the required housing throughout all
of the counties in a way that they feel are adequate.
The main benefit of this type of distribution is that the state can assure that all of
the required new housing is spread, at least to some degree, throughout the entire state.
However, these state level delegations of housing requirements may not take into account
the unique situations and problems that plague different counties and cities such as San
Luis Obispo and Morro Bay.
This is where the efforts of local governments come into factor. The local
governments while being far less equipped to deal with the allocation of housing
statewide, may be better equipped to deal with it at the local level. Morro Bay is in a
better situation to determine what the appropriate number of housing for their community
is, however, they are in no way prepared to determine what is appropriate for the rest of
the County, much less the state.
In short, it is necessary for both state and local governments to work together in
order to determine appropriate housing allocations. One way to address housing issues at
the regional level would be to assemble a housing task-force that could work with each
jurisdiction within the County in order to determine an appropriate number of housing for
each community. A system such as this would be comprised of at least one member from
each jurisdiction, as well as developers, environmentalists, and other special interest
groups, this, would better suit for taking into account the special needs of the jurisdictions
and relaying those concerns back to the State.
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REFERENCES
Morro Bay General Plan, Housing Element, 1995
Morro Bay Local Coastal Plan, 1995
Mike Pratter, Associate Planner, Personal Interview, November 13, 2002
United States Census Bureau, Census 2000
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