In a theoretical world we like the certainty of a yes or no question. The problem is that, in the policy realm, as opposed to the political one, yes or no rarely exists. There are nuances and shades of gray that should make us think twice before proclaiming yes or no.
Along these lines I have a big concern that opponents of development in Davis have attempted to weaponize the city’s affordable housing program. For me, we do need more affordable housing, but we have to recognize that money has to pay for that affordable housing and we also have to recognize that, until the increment tax comes back – if it ever does – the only way to do so is to build more housing.
I think it is therefore important to understand the dynamics involved in decisions on affordable housing before evaluating a project and whether or not it has sufficient affordable housing.
For example, the original Nishi proposal that came before the voters in 2016 had no on-site affordable housing. The council had exempted the project on the grounds that it was vertical mixed use. They then came up with a deal for $1 million in in-lieu fees, which many voters saw as insufficient and the project was voted down.
The next time the project came back – vertical mixed use was largely gone. The developers stripped out both the small commercial and the R&D proposals from the project, added in rental housing, and included on-site affordable housing.
The big debate – or one of them – at the time of the election was whether the city was selling out by reducing affordable housing requirements from 35 percent to 15 percent. But this is where understanding the dynamics is so important.
The 35 percent requirement was put into place when we had a steady stream of increment tax dollars coming in to subsidize affordable housing. That revenue stream is gone. That is not a small deal. That means any affordable housing must be subsidized internally – in perpetuity.
That’s a key factor that no one seems to understand – this is not just a cost of building the housing which is a one-time fee, it is an on-going cost that has to be borne somehow. I did a rough calculation that the difference between 15 percent and 35 percent was about $2.8 million – every year. That would mean that somehow the developer would have to cover the cost of $2.8 million annually to increase the share of affordable housing. That’s not a small cost, especially when it is ongoing.
So here you have opponents of the project attacking affordability of the market rate units, and then they want to impose additional costs on those units.
It is hard for the citizens to evaluate these costs, because we don’t have access to the books. But the consultants looked at them and concluded that with the 15 percent requirement, the project was going to have greatly reduced margins.
The bottom line is that people had a choice in the election – do they take 200 beds of affordable housing or do they take zero? That was the choice before them. We can argue all day whether the project can pencil out with more units, but the choice before the voters was 200 or 0. The voters this time chose the 200-something affordable beds.
When asked, a student leader was supportive of the project at the 15 percent level and happy that students were getting some beds that were subsidized.
That gets me to the issue of vertical mixed-use exemptions.
The first problem I have here is that, as I said before, affordable housing has become weaponized as a reason to oppose projects. A project doesn’t have enough affordable housing – oppose it. The problem with that approach is it means we don’t get affordable housing.
The second problem here is that the same people who are opposing all these projects are the same people saying we need higher affordable housing standards in this town. The reality is that, when you oppose a project, you are attempting to prevent affordable housing from being built. The only way we can build affordable housing right now is when it is subsidized by market rate housing – which means if you don’t build the market rate stuff, for the most part you won’t get the affordable.
The third point is that in a perfect world we would not need a vertical mixed-use exemption. The exemption was put into place when RDA (Redevelopment Agency) funding disappeared. Prior to that, you could fund affordable housing regardless of the type of project, and you could do so at a much higher rate. Until we find a replacement for that funding stream, we are forced to cobble together approaches – none of which will happen if we do not build more housing.
That leads us to the fourth point – is vertical mixed use a good thing? I think most people would argue that it is. You are more efficiently utilizing available land. The University Mall is a nice place, but in 2018 it is inefficient to have essentially single-story buildings sprawling out over an 8-acre parcel. It would be much better to have the same commercial footprint, maybe even expand it a little, and put housing and parking over it.
But that costs money. A lot of money. Mixed use is a lot more expensive to build because you have to have twice the infrastructure – some for the commercial and some for the residential components. That is a big thing I learned. That increases the costs to build.
That is why if you read the fiscal analysis from the downtown, they say you have to go up at least four stories for the redevelopment to make fiscal sense. They write that “redevelopment only made financial sense when it was greater than or equal to 4 stories tall.”
The larger picture on affordable housing is that, without finding new RDA funding, we are going to be stuck with the current approach, with which most people are unsatisfied. That means the only way to build affordable housing is by building market rate housing, it means that the return will be lower, and it means we will end up exempting things like vertical mixed use.
So, yes or no – do I support the exemption? It is not a yes or no question. Right now it is a necessary evil. But I don’t think it is a necessary policy if we have funding available for affordable housing in this community.
Find us a revenue stream and those rules will change.
But the bottom line is that, if you want affordable housing you cannot oppose every project. That is why, in the end, I am skeptical of this argument to begin with – it seems like an excuse to oppose new development rather than an issue born from real concern over affordable housing.
—David M. Greenwald reporting