City Council Again Asked To Punt Permanent Affordable Housing Ordinance To Future Date


By David M. Greenwald
Executive Editor

Davis, CA – Set to expire next month, the council is being asked to extend the sunset date of the current temporary ordinance to allow the city to complete its Downtown Plan and General Plan Update.

When the Planning Commission initially made their recommendations to City Council back in November 2018, they “recognized that it might be worth considering extending the current ordinance to be in conjunction with the Downtown Specific Plan, the Housing Element update, or another appropriate effort.”

The extension until November 30, 2021 was made with the idea that the city would be able to make progress on the Downtown Plan as well as complete the Housing Element which had initially been expected by May 2021.

Staff however, acknowledges, “delays due to the COVID-19 pandemic, as well as shifting certification requirements from the California Department of Housing and Community Development (HCD) throughout the development of the document resulted in the 2021-2029 Housing Element not being adopted until August 2021.”

With the Housing Element adopted, the effort to amend the rental requirements found in the Inclusionary Housing Ordinance, staff writes, “can now benefit from a more informed and strategic approach for a more comprehensive update to the permanent inclusionary housing ordinance.”

Furthermore, “the Draft Downtown Specific Plan and accompanying form-based code are at a point where the documents could also inform the update.”

Staff intends to solicit proposals “from qualified consultants to prepare financial modeling and recommendations for permanent modifications to the Inclusionary Housing Ordinance.”

The current ordinance, adopted back in 2018, after AB 1505 reestablished local authority following the Palmer Decision, “temporarily establishes an alternative affordable housing target of 15% by the bed, bedroom, or unit with a 5% extremely-low, 5% very-low, and 5% low-income mix.”

Further, “The current ordinance also temporarily allows the City Council to consider a myriad of factors in determining whether to approve an alternative affordable housing proposal, such as whether the developer makes a large infrastructure or transportation contribution.”

In December of 2018, the council modified the ordinance to include inclusionary requirements for stacked flat condominiums and vertical mixed-use development.

At the time, the council voted to replace the previous exemptions to the affordable housing ordinance for such developments and replace them with a more flexible requirement that allows the council to adjust the inclusionary percentage up or down, based on the size of the project and the targeted income levels.

Councilmember Will Arnold said that, at the bottom line, “we want to see these things built.”  He was concerned that if they made the requirements too high, “nothing would be built.”

Councilmember Arnold said that “35 percent of nothing, is nothing.  So if the thing doesn’t get built because we’ve put an onerous requirement on there, then no one gets to live there… So that’s the balancing act that we have in front of us.”

If the council were to take no action, “the alternative option will expire and the City will need to enforce the standard option of 35 percent affordability.”

Back in 2018, the city asked Plescia and BAE to review the ordinance – the report evaluated development economic feasibility, based upon project economics at that time.

The report concluded 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.”

The study specifically assesses the 35 percent requirement in the city’s base regulation. The study asks, if 35 percent is not feasible, what is?

The report finds: “Using the same rent and income limit assumptions from the economic analysis, the interim affordable housing requirement of 5% at the extremely low, very low, and low income categories equates to an approximately 10% operating income reduction to an otherwise market rate project. A lower on-site requirement at higher income levels, such as 10% of units affordable to low income levels, would result in an approximately 5% operating income reduction (instead of 10%).”

Affordable housing advocates have been critical of the 15 percent goal however.

Social Services Commissioner Donald Kalman back in 2018 called the consultant report “very disappointing.

“This is the death knell for affordable housing in Davis, is how I read this report,” he said.  “We’re obviously not doing 35 percent anymore, those days are over.”

Greg Rowe, a Planning Commissioner speaking as a private citizen, stated, “The 35 percent goal is not feasible without RDA [Redevelopment Agency funding].”  He went so far as to say that “15 percent is going to be really hard to achieve unless it’s a student rent” and that the Interim Ordinance number of 5-5-5 “may not work.”

The city is continuing under the operating assumption that “the 35 percent affordability requirement infeasible under several defined scenarios.”

Part of the staff item will be to allocated $20,000 awarded from SB 2 Planning Grant provided by HCD to retain a consultant to complete financial modeling, issue ordinance recommendations and to present them to the City Council for final action.


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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9 thoughts on “City Council Again Asked To Punt Permanent Affordable Housing Ordinance To Future Date”

  1. Matt Williams

    Further, “The current ordinance also temporarily allows the City Council to consider a myriad of factors in determining whether to approve an alternative affordable housing proposal, such as whether the developer makes a large infrastructure or transportation contribution.”

    Translation … let’s give the developers the opportunity to not have to provide affordable housing if they contribute to fixing our streets, which we don’t have enough money to do ourselves.

    Translation of the translation … streets are more important than affordable housing and/or bottom-line profitability for developers is more important than affordable housing.

  2. Keith Y Echols

    There’s a realistic limit to what you can push to be tacked on for inclusionary housing.

    Remember that inclusionary housing just pushes market rate housing prices up.  I’m fine with that to a certain limit.  I am not in favor of new market rate housing unless it provides a tangible benefit to the existing residents.  But I do not want inclusionary housing to significantly hinder the development of new market rate housing when it does deliver a tangible benefit to existing residents.

    I wonder if the city could get more bank for the buck if it took in lieu fees from developers and used it construct it’s own affordable housing facilities (a mix of market rate, workforce and affordable housing units).

    Of course its all a moot point at the rate new market housing is being approved and constructed in Davis anyway.

    1. David Greenwald Post author

      “Remember that inclusionary housing just pushes market rate housing prices up. ”

      You are stating as fact something that economists do not agree on.

      For example:

      Question: If cities implement an inclusionary housing policy, will the price of
      market rate housing increase significantly?

      Answer: No, the price of market rate housing will not increase significantly.
      The available evidence suggests the presence of an inclusionary housing
      policy may result in an increase in price of new market rate housing by no
      more than 3 percent —and likely will have no price effect at all.

      1. Keith Y Echols

        I’m speaking from personal experience and conversations with other builders I know.  I’ve actually done the pro forma for projects that factored in the cost of inclusionary housing into a project.

        Do you think builders just absorb the cost of inclusionary housing out of the goodness of their hearts?  Or do they pass on the costs of inclusionary housing on to the pricing of the market rate homes they sell?

        And what happens when new construction happens in markets?  Home prices go up?  Why?  Because of the reasons I’ve listed before in previous posts.  Builders build where home prices are predicted to go up.  New homes sell at a premium which then continues to pull up the value and prices of the existing homes in a community.

        1. David Greenwald Post author

          The problem is that you are not doing any sort of systematic analysis. The general consensus is that building reduces housing costs. You may sell the new housing stock at a higher cost, but it reduces the cost of existing housing because it reduces the demand.

        2. Keith Y Echols

          Yes, I know the simplistic supply and demand argument that’s been made.  I’ve laughed about it many times with others in the industry (you know…those of us who put our money at risk in this sort of thing…I’ll let you in on a little secret…we are the experts on this subject).  It’s amazing how hard people cling to simple ideas because it’s what they understand vs a more complex set of variables.   I’ve told you the reasons why….you just choose not to believe them.



        3. Keith Y Echols

          Let me caveat my statement by saying it applies to California.  I am not experienced or sure about my statements outside of California; new home construction gentrification effects (I’m going to assume builder behavior is the same) vs. supply/demand effects on local housing markets

        4. Matt Williams

          David Greenwald said … “The general consensus is that building reduces housing costs. You may sell the new housing stock at a higher cost, but it reduces the cost of existing housing because it reduces the demand.”

          Increasing supply of a commodity reduces the demand?  That statement defies logic.  To test that statement, let’s hypothetically walk into Nugget Markets and to the laundry detergent aisle.  You appear to be saying that if there are more bottles of Tide Liquid laundry soap on the shelf, the number of bottles of Tide Liquid that are purchased will decrease. That simply does not happen in real life.

          Further, in markets where there is a significant amount of unmet demand, because the available supply is way below the market demand, any marginal increase in supply will have no effect on prices as long as the amount of unmet demand is still significant. The only way that prices go down is if the available supply is greater than the available demand.

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