City staff presented revisions to the Affordable Housing Production Program (AHPP) pilot and an expanded voluntary program for additional eligible projects. The ordinance introduced for first reading codifies the original pilot for the first 1,000 units and establishes expanded terms for further projects that meet eligibility criteria.

Key changes in the revised ordinance include:

- Gap financing increase: the upfront gap financing per affordable unit rises to $160,000 and will be indexed annually to a building-cost index.

- At-risk unit purchase option: the program adds a mechanism to purchase affordable units whose deed restrictions are at risk of expiration, with a required 75-year covenant extension; structural/condition guardrails apply and the city manager would assess eligibility.

- Enforceable off-site milestones: for off-site (alternative-site) affordable units, applicants must submit entitlements and plan-check materials by specified milestones and commence construction on a defined schedule (48 months for non-coastal projects, plus limited extensions for coastal projects); missing milestones could trigger city acquisition of the site and retention of gap financing.

- Community-benefit payment: if a local tax measure (Measure GS) were reduced or eliminated, a community-benefit payment equal to 5% of the first transfer consideration (or the shortfall) would apply to projects that use the program.

Staff described the ordinance as a tool that unlocked projects that had been stalled in a difficult financing environment. Multiple speakers in public comment both praised the pilot’s ability to unstick projects and urged safeguards so promised affordable units are delivered as intended.

Council action: after discussion and public comment, council members voted to introduce the ordinance for first reading and adopt CEQA findings, thereby codifying the pilot and authorizing the expanded program framework as described.

Next steps: staff will move the ordinance through second reading and adoption processes and implement the program with the revised gap financing and milestone enforcement provisions.