Monday Morning Thoughts: Changes to Affordable Housing Not in the Best Interests of the Community

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Back in June 2009, the Chiles Ranch project for East 8th Street was the source of neighborhood discontent and acrimony.  Eventually the council approved a design that called for 108 total units with an affordable housing requirement of 22 low to moderately priced affordable units.

The developer is now asking for changes.  They have already built the first phase of the market rate units, but are now coming back to ask for changes to the affordable units.

The result is a reduction of affordable units on site from 22 condos to 6 attached single-family units along with 12 in-lieu fees at $75,000 per unit for a total of $900,000.

We don’t get any kind of explanation in the staff report as to why this change has been requested, but it does not appear to be in the best interests of the community.

The staff writes, “The applicant and staff believe the revised housing plan aligns with current City Council goals and City policies related to housing.”  The developer made agreements at the time, has started to build the market rates, and should be held to building actual affordable units rather than putting fewer units into a fund.

Staff does not explain why the request is in the best interests of the city.

Staff notes that the planning commission was split on this issue.  They write, “A significant issue was a lack of understanding of how fees paid by the developer would be utilized and concern that the fees would be used for an undetermined project at an undetermined time.”

Staff adds, “Staff believes that if information had been available at the meeting demonstrating specificity of where collected in-lieu fees would have likely been allocated, coupled with additional affordable units being provided onsite, it is likely that a majority, but not all, of the commission may have supported the revised affordable housing plan.”

Staff also argues that “there is a proven need for in-lieu fees to support other affordable housing projects in the City. There is also a demand for affordable housing. The proposed revised affordable housing plan would provide both new affordable housing units and fees which would be beneficial to the community.”

But, while they argue that it provides for a greater affordable housing obligation than would be required for a 96-unit project, in their argument they fail to explain how this actually is occurring.  It seems like they are gaining less in the way of affordable housing because they have reduced the amount of affordable housing.

Here is the clearest explanation we can find as to what is happening:

In 2009, the approved plan required 22 for-sale affordable units.  Those are provided in 20 condos and two single-family homes.

The applicant is now proposing to omit the condo units from the project.  By doing so they are reducing the number of units from 108 to 96.

Staff writes, “The decrease in number of units in the project changes the affordable housing requirement from 22 to 14.”

What is unclear from the staff report is whether the elimination of the condo units includes units that are over and above the 20 units that are designated as affordable, or whether the developer was able to game the system by reducing the number of onsite units and thus their affordable requirements.  It appears the latter is the case from a perusal of the 2009 staff report.

But, either way, it would be a problem and not in the best interests of the community.

Why is this reduction in the best interests of the city?

Staff has three arguments for why the new agreement is beneficial to the community.  First, it will provide “a greater affordable housing obligation of on-site units / fees than would otherwise be required for a 96-unit project.”  That ignores the fact that the only actual reduction in size is to the condos which were supposed to be affordable in the first place.  Again, this seems to be gaming the system.

“The project will provide new single-family for-sale affordable housing opportunities for low/moderate income households.”  But the existing developer agreement provides for more opportunities than the revised one would have.

Finally, “The project will provide $900,000 in fees to the Affordable Housing Fund, which could be used to assist with Cannery, Pacifico or a future project.”  That might be good but that comes at a cost of reducing the number of affordable units on Chiles by more than it will add units elsewhere.

This analysis appears to be heavily slanted toward the developers and away from the best interests of the city.

Why do we keep allowing the developers to attempt to renegotiate their terms after an agreement has been reached?

In some cases there are clear financial and financing issues involved – but the city has not divulged any of this.  And the applicant is already building and putting housing on the market, which means that they really have no legs to stand on or leverage.  They can’t build the market rate units without building the corresponding affordable units.

The bottom line is that, despite what the staff report claims, the city would be allowing the developer to reduce the number of available affordable units in the city.

The rationale for doing so is not fully explained from the developer’s perspective and, from the city’s perspective, the arguments appear wrongheaded at best.  It appears that the developer is trying to game the system and the city planners are facilitating that.

—David M. Greenwald



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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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10 thoughts on “Monday Morning Thoughts: Changes to Affordable Housing Not in the Best Interests of the Community”

  1. Sharla C.

    Condos are not necessarily “affordable” due to the difficulty for homeowners in securing financing for these types of units and the association dues that homeowners are obligated to pay monthly…forever.  These dues rise over time, so a $100 monthly fee can rise to hundreds of dollars.  The initial cost may seem to be lower than a house, but the financial obligation combined with the aggravation of having to deal with a bureaucracy made up of your neighbors, homeowners who default on their payments, and the general danger of entering into a financial agreement with people that you don’t know.  22 units is not large enough to spread association costs, so the dues for expensive items like landscaping, irrigation, roof replacement and maintenance may be high.

    I think we should examine more closely the new project, rather than react to the word “affordable.”

      1. Sharla C.

        But it is still a condo.  Will there be an association with accompanying dues?  Is this subsidized and income-qualified only at first sale and then revert to market rate after a number of years?

        Wouldn’t neighbors prefer fewer houses with an affordable unit attached, rather than more homes and a set of condos?

  2. Matt Palm

    Very unfortunate.  Does the developer think the project won’t pencil out now? I’m curious to know why that is–is the market cooling off? I don’t see evidence of that, but then again it’s not in my job description.

  3. Eric Gelber

    This is what’s known as backing out of a deal. It appears the project may have been negotiated in bad faith. In lieu fees are nothing more than a pay-a-fee-and-forget-about-affordable-housing loophole.

  4. Tia Will

    Eric

    This is how it looks to me also. However, to give the developer the benefit of the doubt, I would like to see whether their explanation boils down to anything more than “more profits for me”.

  5. Tia Will

    Eric

    This is how it looks to me also. However, to give the developer the benefit of the doubt, I would like to see whether their explanation boils down to anything more than “more profits for me”.

    1. Eric Gelber

      Tia – There may be an explanation, which is why I said “may have been.”  But even if the project no longer “pencils out,” let’s not assume the only solution has to involve  a reduction in the affordable housing agreed to.

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