One of the big questions facing the city is why they are not getting any market rate multi-family projects anymore that have 35 percent affordable units, as required under the city’s affordable housing ordinance.
At the city council’s workshop back in October, they discussed the possibility that 35 percent is simply too high a requirement to get anything built.
As Councilmember Rochelle Swanson said, “I think the financials are going to dictate that.”
At the time, she suggested that staff reach out to those building the projects to find out what some of the key financing issues are.
“Thirty-five percent of zero is still zero,” she said, referring to the fact that if the units are not built because of the requirements, we get no affordable housing. “It should probably be lower than (35 percent) so that we do see it being built.”
That is the problem that the city faces – we need more affordable housing, but consistently developers and even some affordable housing experts have warned that if the city is setting too high a standard, it could be self-defeating.
But of course we cannot just take the word of developers and builders, and so the city has done the right thing by hiring a consultant, in this case Andy Plescia, to assess what is reasonable.
Robb Davis has asked that staff find out “what has changed.” In particular, why 15 years ago was the city getting projects that had 35 percent affordable housing, but in the last 15 years we have
There is a general belief that the result will be that Mr. Plescia, when his report comes out perhaps in January, will recommend, as will staff, to reduce the threshold. That invariably means that the city and council will be attacked, but the reality is that housing must include realistic affordable requirements. If the current standards mean that nothing at all gets built – then they are self-defeating.
As Mayor Davis said in October, “[I]f our affordable 35 percent (requirement) is meaning that people are not going to build them, then it is time to review that.”
It may be that reducing some of the requirements for affordable housing counter-intuitively means that we get more affordable housing in the long run because it allows more projects to be built, even if those projects have a lower affordable housing requirement.
But some have pointed to the fact that new projects have emerged as proof positive that the current standard works.
But does it?
Sterling presented 198 units, of which 38 were affordable. That comes to just over 19 percent. It is harder to calculate Lincoln40 which will have 71 affordable beds integrated into its 130-unit, 708-bed complex, but clearly that number comes to well short of 35 percent, any way you measure it. Even assuming that the affordable units comprised just the two- and three-bedroom apartments, you still get about 11 percent at the lowest end and, at the high end, 20 percent.
Finally, Nishi is only proposing about 11-12 percent affordable units.
According to the staff report: “While the applicant has not finalized unit density, unit type, or unit totals, the applicant based its affordable housing calculation on a 1,900-bed total of which 1,696 would be market rate beds and 204 would be affordable units.”
The need for these projects to generate new affordable housing and money for affordable housing is understandable. As we have pointed out numerous times, there are two key factors here.
One is the change in the type of development in Davis. As Robb Davis noted in October, in the past the city built larger housing developments which enabled them to have relatively large dedicated sites to build large “a” affordable housing.
“Those days now largely are done,” he said. “We aren’t getting any large developments like that that lead to that kind of ability to create the affordable set aside inside.”
The second is the disappearance of Redevelopment Agency (RDA) funding and the $2 million a year that used to come from that.
The key then may be to find other funding sources, so that the city can move away from using existing developments either to build the housing directly or create a fund through in-lieu fees.
“Just do away (with) in-lieu fees in my opinion,” he said, but we need to find a revenue stream and then set in-lieu fees really high to disincentivize their use.
And here we may have some promising avenues.
One avenue is with the state – and while they will not replace all the $2 million annually that came from redevelopment, it is a start.
Recently the state has created a funding source through SB 2. Sponsored by Senator Toni Atkins, SB 2 would created a permanent funding source for affordable housing by imposing fees up to $225 on certain real estate transactions. It is expected to collect $1.2 billion annually over the next five years, creating a $5.8 billion fund. Also SB 3 would place a $4 billion housing bond on a future ballot that would pay for existing affordable housing programs in California that used to be supported by funds from the state’s RDA.
But the city is also looking for local funding, as those affordable housing programs are still not expected to entirely replace RDA.
The city is also looking at potentially $500,000 to $750,000 to come from its proposed social services tax.
If the voters are willing to pass the measure, the city could have three key sources for affordable housing, two of which are new – one would be new development, one would be state money, and the third would be the parcel tax.
Combined, that could be enough to provide a new supply and maintain the current supply of affordable housing now and into the future.
—David M. Greenwald reporting