By David M. Greenwald
Davis, CA – Council on Tuesday held what amounted to a sprawling discussion attempting to thread the needle between affirming their commitment to 15 percent affordable, pushing for as much affordable as possible and recognizing that requiring too much in the way of affordable could create conditions that would discourage development altogether.
The council passed a motion that would adopt a new ordinance requiring 15 percent affordable on rental projects with the division as follows: half of that being low and half of that being very low, the default being that these are built on site.
As Bapu Vaitla, one of the members of the subcommittee put it, “(We need) to signal this dynamic approach that we have to addressing volatility in market conditions and also variation land values across Davis.” He said, “I think in the past we’ve been hamstrung a bit by the fact that some developments can afford to provide a lot more affordable units and some can’t.”
The challenge he said, “How do we deal with that heterogeneity, that complexity, the approach that we’re laying out now, really the innovation is to set some clear standards within the language of the ordinance, but then also have these guidelines that we’re calling them be dynamically updated.”
Gloria Partida acknowledged, “To be clear, this inclusionary ordinance is not going to be the end of how we solve our affordable housing requirements.” She noted, “We have a certain number of units that we have to build, and through the inclusionary housing ordinance, it’s not how we’re going to get all of these units.”
Inclusionary ordinances can be a double-edged sword. City Attorney Inder Khalsa, for instance, noted, “A few years ago I would’ve said that HCD was warmly supportive of inclusionary ordinance, but that has changed over the last few years, and they’re now looking at them more critically in the context that some of these inclusionary requirements are so onerous that they’re preventing the development of any housing, market rate or otherwise, and therefore contributing to the overall housing crisis.”
By that token, “HCD will be looking at our inclusionary ordinance to see if it’s impacting our ability to meet our goals under our arena as we move through the current housing element cycle and into the next.”
As Councilmember Partida noted, “We landed on this being 50 percent low and 50 percent very low, and not the extremely low piece, because the extremely low units tend to cater to a demographic that often needs support. Those units are more well-suited to ‘Big A’ affordable.”
Much of the discussion on Tuesday focused on alternatives to the hard and fast 15 percent rule.
Some of that discussion focused around a notion of transparency or “show your work,” a potential requirement that a prospective developer demonstrate in writing why the project cannot include inclusionary housing.
Gloria Partida noted, “You hear often that either we’re not holding developers accountable or that there’s not enough transparency in the process.” She said, I think that this is an important piece to start a conversation if someone comes forward and says we can’t meet 15 percent.”
Vaitla added, “I think the show your work requirement for discretionary projects is a reasonable request to say that there needs to be some evidence more than just your word. That certain requirement is not feasible.”
He also suggested that the city hire consultants or analysts to check that claim.
A big point of discussion was vertical mixed use. Currently, the code requires 5 percent affordable for vertical mixed use. However, if the code as proposed were passed, that number would go up to 15 percent.
Vaitla pointed out, “I’m agnostic on whether it should go in the guidelines or codified.” He explained, “For me, the most important point is to make the definition of vertical mixed use more precise.”
Mayor Will Arnold noted, “Vertical mixed use potentially isn’t so much about feasibility as it is about incentives and what we want built in certain places.”
Vaitla added, “I just don’t think we have a very precise sense of what vertical mixed use is.”
Partida added, “So I tend to agree that I think it’s really important for us to make sure that a mixed use project is in fact a mixed use project. And it’s not like one coffee shop in a corner. That to me is not mixed use.”
She expressed concern, “I am afraid of us completely losing what we call downtown.”
Will Arnold said, “If we were to lose storefronts in the downtown because redevelopment was happening to some of these buildings and they became 100 percent residential and the ground floor was only accessible to residents, I think that would be a negative outcome for our downtown.”
Sherri Metzker pointed out that under the downtown plan, a 100 percent residential project would not require a rezone.
City Manager Mike Webb noted, “With the form-based code, it allows flexibility of the uses within that space, including the potential of ground floor residential and the use as you described.”
He said that one option for amending the Downtown zoning would be “to mandate ground floor, at least a certain percentage of ground floor commercial use separate and apart from the inclusionary ordinance.”
Vaitla added, “I’m not comfortable giving a recommendation for the guidelines right now without us making a decision on what vertical mixed use should be defined as.”
He said, “I would like more stronger evidence for why 5 percent.”
Mike Webb noted, “There are more complications, there are more risks, there are more costs, generally speaking with vertical mixed use.”
He suggested that there some ideas and options for the council to consider and chew on.
“In the meantime, the meantime, until that would be adopted, the standard would be 15%. And in that time, maybe we would hear from would-be applicants or developers,” he said.
Overall, the council laid out their preferences on alternatives, and dismissed a catch-all option.
Bapu Vaitla noted, “I don’t think I’ll support a catch-all.” He said, “I think it sort of pushes applicants to negotiate things down and down and down. ”
Mayor Arnold responded, “What they’re going have to do in a catch-all situation is present us with something that is so compelling that we would be willing to get creative. And having been part of these discussions where we have had things that in my opinion, were compelling enough that we got creative, I don’t want to preclude that.”
He added, “I trust the council isn’t going to be negotiating down.” He added, “You’re not wrong Bapu… I like maximum flexibility, maximum discretion on the council.”
Vaitla raised concerns, going back to the Cascadia study, “the core of it is based on an Internal Rate of Return for the application… it was 12 percent.”
He said, “So in effect, the public sector is being asked to guarantee or ensure an internal rate of return for a private firm. That’s really what’s happening here”
He said, “So one lesson to draw from that is that we need to guarantee an internal rate of return for private developers, private firms. Another lesson of that is that private housing markets are broken or severely damaged, and maybe it’s time for the public sector to get involved in financing or even building housing if we’re having so much trouble getting private capital to build housing. ”