On Tuesday night, Eileen Samitz during public comment pressed the city council to eliminate the exemption for affordable housing requirements in vertical mixed-use projects. She is not the only one to have done so in recent weeks.
At the meeting, she re-distributed a letter, noting “the major problem of ‘vertical mixed-use’ zoning category, which has major flaws and is being used in a way that it was never intended for. The vertical mixed-use zoning category (was) clearly intended to offer incentives for more ground level retail in exchange for residential which would be exempt from affordable housing.”
She argues: “Since this ‘vertical mixed-use’ zoning category (is) apparently intended for the downtown for small projects, it needs to be better defined to prevent developers from mis-using this zoning category for enormous projects outside the downtown like the Nishi project and the MRIC project.”
She argues that the “language needs to be corrected on these aberrant zoning exemptions. Davis citizens would not expect nor support 650 (proposed at Nishi) or 850 residential units (alternative plan proposed at MRIC) from being considered ‘exempt’ from affordable housing.”
She concludes: “I urge the City Council to revisit this seriously flawed and detrimental ‘vertical mixed-use’ zoning category which is detrimental to the City as written and to re-visit and correct the language … to remove the affordable housing exemption.”
The purpose of this piece is to address the issue of vertical mixed use and the affordable housing exemption, not to address whether it should have been applied in any specific case. From a political perspective, it is pretty much accepted that the council erred in exempting Nishi 1.0 from the affordable housing provisions – a decision that likely cost them that project.
However, the problem we have with Ms. Samitz’s comments overall is that they are not based on any type of fact-based process.
Mike Webb on Tuesday pointed out that the city continues to operate under an interim affordable housing ordinance. The city has commissioned A. Plescia & Co. to examine fiscal feasibility and expects to have the information in front of them by this fall. Part of what they will re-examine is vertical mixed use.
However, let us not pretend that much is going to change here. Mr. Webb, in an email to the Vanguard, pointed out that Plescia actually did a similar report in 2015.
“I think the core issues will remain the same – at what point do these projects become financially infeasible/undesirable for an applicant to undertake,” he said.
We can also note that the findings from Plescia on vertical mixed use in the downtown for the downtown plan were not encouraging, as well.
Whatever decision we make should be made based on analysis, rather than on assumptions and ideology.
Here are the basic findings from 2015 (see report here: http://cityofdavis.org/home/showdocument?id=5063).
First they find, running analysis for a variety of prototype alternatives, “It appears that all of the market rate residential/mixed-use development prototypes without any affordable housing requirement would either be ‘likely’ or ‘possible’ to occur based on estimated return-on-investments within or near the assumed targeted threshold ranges (10% to 12% of gross sales revenue for the ownership housing and 15% to 20% of total development cost for ownership housing/mixed-use (residential and commercial) development).”
However, they find that the imposition of an affordable housing fee at the city’s prescribed level of $75,000 per unit “has the effect of reducing the estimated return-on-investment for certain development prototypes to levels that make such developments either only ‘possible’ or ‘unlikely’ to occur.”
Here they find, “These include Prototype Nos. 1 and 1A as ‘unlikely’ based on the estimated return-on-investment using percentage of total development cost as a factor; and Prototype Nos. 2, 3 and 4 as only ‘possible’ or ‘unlikely’ based on the estimated return-on-investment (using percentage of total development cost (Prototype Nos. 2 and 4) and percentage of gross sales revenue (Prototype No. 3) as factors.”
Finally, they look at on-site affordable housing units at the level of 10 percent of the total units, with a density bonus (one for one), and find that “has the effect of reducing the estimated return-on-investment for certain development prototypes to levels that make such developments either only ‘possible’ or ‘unlikely’ to occur.”
They find, “These would include Prototype Nos. 2, 3, and 4 as only ‘possible’ or ‘unlikely’ based on the estimated return-on-investment (using percentage of total development cost (Prototype Nos. 2 and 4) and percentage of gross sales revenue (Prototype No. 3) as factors.”
Based on this, they write that “the City should give consideration to the extent of any affordable housing requirements (in terms of the size of development subject to affordable housing requirements, the extent of an affordable housing fee, and/or the percentage of required units) are targeted to a level that would allow a proposed stacked condominium and/or vertical mixed-use development prototype to be developed with an acceptable return-on-investment to a private developer.”
They add, “The City might give consideration to affordable housing provisions that relate more directly to the type of urban scale development addressed in this report due to the extent of the overall development costs associated with such development.”
Plescia then recommends establishing a minimum sized residential or mixed-use development before imposing an affordable housing requirement, establishing an affordable housing fee that may vary depending on the type and size of a proposed residential/mixed-use development and “establishing a reasonable level for the required percentage of affordable housing units depending on the type and size of a proposed residential/mixed-use development.”
Bottom line, the city is going to look at this again. Mr. Webb notes that what needs to be taken into consideration are factors such as risk, added construction liability costs and scale.
He concludes: “It may well be that certain scales of projects may be better able to absorb affordable housing, even if at an amount lower than that of other project types. “
We should certainly take a look at a number of options. But the bottom line here, I think, is that looking at the report from 2015 and the report from this spring, the costs of construction for these vertical mixed-use projects are going to make them difficult to pencil out under the best of circumstances.
We therefore have a tradeoff. If we want to have infill and densification, we are going to have to figure out other ways to build affordable housing. If we want affordable housing, going to peripheral projects with land dedication sites is the best way to do so.
—David M. Greenwald reporting