The city has released the Affordable Housing Ordinance early. It is set to be reviewed on November 14 by the Planning Commission and November 19 by the Social Services Commission.
The city’s affordable housing policies have undergone changes in recent years, as the 2009 Palmer decision prohibited local jurisdictions from imposing affordable housing requirements on residential and mixed-use projects of more than 10 dwelling units per lot.
In addition, there was the elimination of the Redevelopment Agency (RDA) that cut funding for affordable housing.
However, in 2017, Governor Jerry Brown signed a number of new housing bills into law including AB 1505, which “overturned the 2009 Palmer decision and thereby restored the legal authority of cities and counties to require affordable housing in rental development projects.”
In addition, “the State imposed some parameters to ensure affordable requirements do not unduly constrain housing production. Of particular note is a provision allowing the State to review and potentially require an economic feasibility study for any local jurisdiction that requires more than 15% low income affordability.”
The city in February passed an interim Affordable Housing Ordinance with the plan that it would sunset on December 31. The law establishes the housing target at 15 percent “with a 5% extremely-low, 5% very-low, and 5% low-income mix.”
Staff has identified four key issues:
- What is an appropriate expectation for percentage of affordable units (or ranges of percentages) within a non-mixed use multi-family rental development? Should the percentage vary based on prototype and/or location?
- Should the City allow by-the-bed or by-the-bedroom leases, or only by-the-unit leases?
- Is there a preferred income target for affordable rental housing? Extremely low income, very low income, or low income?
- When, if ever, should the City accept land dedication or fees in lieu of on-site affordable apartments?
At this time, staff is anticipating that on November 27 they will go before council with two requests:
- Extend the current interim ordinance for a limited period, to allow additional commission/community review of draft replacement requirements; and
- Provide preliminary direction on each of the four key issues identified in this report.
Staff had Plescia & Company prepare the report in December 2017 and then had BAE Urban Economics complete a peer review of the report. The report was then updated in October.
Among the findings: “The report concludes that – under current economic conditions – the Downtown Core Mixed-Use and Large Urban Mixed-Use are unlikely to be feasible, even without inclusion of any affordable housing requirements. Construction of the Large Traditional prototype may have the potential to be feasible, however, may not have sufficient net project value to support land acquisition costs in Davis.”
Staff continues: “[A]partment developments have been proposed, and some have even included affordable housing components. However, with the exception of the Sterling project, the approved apartment development plans have been by-the-bed/bedroom rental, and not the by-the-unit affordable housing addressed in this report.”
The report concludes that “including affordable housing requirements will increase the challenge of feasibly developing multi-family rental housing and will tend to discourage production of such housing.”
Staff writes: “The policy tradeoff for the City is how and whether to require affordability components in rental housing, given the estimated negative financial impacts on project feasibility.”
Until recently, rental affordable housing was “intended to be leased by the unit, to a household.”
However, over the last two years, “the City has approved a few housing developments targeted at students that include by-the-bed or by-the-bedroom rental provisions.”
This has advantages: rents can be set at a level affordable for a one-person household with the advantage to students being that they often don’t qualify for housing subsidies. Each tenant is responsible only for their own rent. Utilities are included in the rent. By-the-bed rentals “complement the fluid nature of household formation common in student rental housing.”
Staff notes that the interim ordinance permits any configuration for the rentals: “Staff is requesting Commission recommendations to the City Council on whether alternatives to by-the-unit rentals should be permitted or encouraged.”
HUD (Dept. of Housing and Urban Development) estimates that around 8956 households are in the low to extremely low income range in Davis and “[a]pproximately 80% of these households are paying more than 30% of their income for housing.”
Furthermore, “Of the extremely-low-income renter households, fewer than 7% are paying less than 30% of their income for housing, and an additional 4% are paying between 30% and 50% of their income for rent. The remaining 88% are either paying more than 50% of their income for housing, or have no income.”
As a result of overpaying, they have less than 70 percent of their income available for other goods and services, which includes food and transportation.
Staff writes: “Currently, the interim ordinance sets a target income mix of 5% extremely low, 5% very low, and 5% low. Staff is requesting Commission recommendations to the City Council on whether there is a preferred income target for affordable rental housing.”
All but one of the recent multi-family developments has a form of on-site affordable housing – with the exception being Sterling, which has a dedicated site for 38 family-oriented apartments to be developed by Mutual Housing.
Staff notes: “This site would be the only remaining parcel dedicated for non-profit affordable housing within City limits, after construction of the Creekside development beginning this fall.”
Staff notes that while there are advantages to on-site housing in that they can be integrated with market-rate units, constructed contemporaneously with them, and they do not require a minimum number or minimum parcel size to be practical, the biggest downside is, “The cost of providing on-site affordable units often precludes developers from providing a high number of extremely-low-income units.”
In addition, they lack the support services for extremely-low income residents that are not provided in mixed-income projects.
The advantage of land dedication sites is that the developer has “access to local, state, and federal subsidies that are available only for 100% affordable projects.” Further it allows “for the inclusion of extremely-low-income units and/or projects that serve vulnerable populations such as seniors, individuals who are experiencing chronic homelessness, and individuals who have a mental health disorder,” and “[i]ntegration of social services can be facilitated with non-profit owned, 100% affordable housing.”
On the downside, the units will not be integrated, and the construction lags behind the construction of market-rate units because it can take longer to solidify partnerships and secure subsidies, and it “requires a lot size of at least 3-4 acres (assuming 15 dwelling units per acre) to achieve economies of scale and is therefore only an option for large scale development projects.”
Staff is requesting recommendations to the council as to whether land dedication, in lieu fees or on-site affordable units should be accepted or encouraged.
—David M. Greenwald reporting