David M. Greenwald
Davis, CA – The Davis City Council is being asked by staff to extend the interim Affordable Housing ordinance once again. The current ordinance would expire on November 30, 2022, unless extended by City Council. They are being asked to extend the sunset date through June 30, 2023.
Staff notes, “The current ordinance is intended to serve as a bridge that would allow City Council to act on multifamily development proposals with a project specific affordable housing plan of less than 35% of the units being designated as affordable housing, while staff prepares a comprehensive update to the inclusionary requirements for multifamily projects for further City Council consideration.”
If the council does not extend the deadline, council would be “precluded from approving housing proposals that do not fully comply with the existing 35% affordability requirement.”
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.”
A year ago, staff noted that the extension was pushed to November of 2021 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. None of that has come to pass.
The council has already extended the sunset date three times.
Last year, staff noted, “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.”
And now HCD has declined to certify the Housing Element and so that is still being sorted out.
Staff notes this time, “As part of a legislative package that aims to address the state’s housing shortage, Senate Bill (SB) 2 established a permanent source of revenue intended to increase the affordable housing stock in California.”
HCD is directed to use 50 percent of the first year’s revenue “to establish a planning grant program to fund local government activities that streamline housing approvals and accelerate housing production.”
A component of the City’s request for the first year of available funding under SB 2 “includes $20,000 for additional funding that the City proposes to use to commission additional economic analysis that builds upon the previous study completed in 2018.”
The city has received the funding, has selected a consultant and has started work on the new ordinance.
Staff writes, “Extending the sunset date of the current ordinance provides an opportunity to complete and further refine the pro-forma analysis and inform a permanent ordinance.”
The city also “continues the process of preparing a Downtown Davis Specific Plan for the downtown that is envisioned to serve as significant future housing opportunity area.”
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 found: “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%).”