On Tuesday night, Eileen Samitz during public comment pressed the city council to eliminate the exemption for affordable housing requirements in vertical mixed-use projects. She is not the only one to have done so in recent weeks.
At the meeting, she re-distributed a letter, noting “the major problem of ‘vertical mixed-use’ zoning category, which has major flaws and is being used in a way that it was never intended for. The vertical mixed-use zoning category (was) clearly intended to offer incentives for more ground level retail in exchange for residential which would be exempt from affordable housing.”
She argues: “Since this ‘vertical mixed-use’ zoning category (is) apparently intended for the downtown for small projects, it needs to be better defined to prevent developers from mis-using this zoning category for enormous projects outside the downtown like the Nishi project and the MRIC project.”
She argues that the “language needs to be corrected on these aberrant zoning exemptions. Davis citizens would not expect nor support 650 (proposed at Nishi) or 850 residential units (alternative plan proposed at MRIC) from being considered ‘exempt’ from affordable housing.”
She concludes: “I urge the City Council to revisit this seriously flawed and detrimental ‘vertical mixed-use’ zoning category which is detrimental to the City as written and to re-visit and correct the language … to remove the affordable housing exemption.”
The purpose of this piece is to address the issue of vertical mixed use and the affordable housing exemption, not to address whether it should have been applied in any specific case. From a political 
perspective, it is pretty much accepted that the council erred in exempting Nishi 1.0 from the affordable housing provisions – a decision that likely cost them that project.
However, the problem we have with Ms. Samitz’s comments overall is that they are not based on any type of fact-based process.
Mike Webb on Tuesday pointed out that the city continues to operate under an interim affordable housing ordinance. The city has commissioned A. Plescia & Co. to examine fiscal feasibility and expects to have the information in front of them by this fall. Part of what they will re-examine is vertical mixed use.
However, let us not pretend that much is going to change here. Mr. Webb, in an email to the Vanguard, pointed out that Plescia actually did a similar report in 2015.
“I think the core issues will remain the same – at what point do these projects become financially infeasible/undesirable for an applicant to undertake,” he said.
We can also note that the findings from Plescia on vertical mixed use in the downtown for the downtown plan were not encouraging, as well.
Whatever decision we make should be made based on analysis, rather than on assumptions and ideology.
Here are the basic findings from 2015 (see report here: http://cityofdavis.org/home/showdocument?id=5063).
First they find, running analysis for a variety of prototype alternatives, “It appears that all of the market rate residential/mixed-use development prototypes without any affordable housing requirement would either be ‘likely’ or ‘possible’ to occur based on estimated return-on-investments within or near the assumed targeted threshold ranges (10% to 12% of gross sales revenue for the ownership housing and 15% to 20% of total development cost for ownership housing/mixed-use (residential and commercial) development).”
However, they find that the imposition of an affordable housing fee at the city’s prescribed level of $75,000 per unit “has the effect of reducing the estimated return-on-investment for certain development prototypes to levels that make such developments either only ‘possible’ or ‘unlikely’ to occur.”
Here they find, “These include Prototype Nos. 1 and 1A as ‘unlikely’ based on the estimated return-on-investment using percentage of total development cost as a factor; and Prototype Nos. 2, 3 and 4 as only ‘possible’ or ‘unlikely’ based on the estimated return-on-investment (using percentage of total development cost (Prototype Nos. 2 and 4) and percentage of gross sales revenue (Prototype No. 3) as factors.”
Finally, they look at on-site affordable housing units at the level of 10 percent of the total units, with a density bonus (one for one), and find that “has the effect of reducing the estimated return-on-investment for certain development prototypes to levels that make such developments either only ‘possible’ or ‘unlikely’ to occur.”
They find, “These would include Prototype Nos. 2, 3, and 4 as only ‘possible’ or ‘unlikely’ based on the estimated return-on-investment (using percentage of total development cost (Prototype Nos. 2 and 4) and percentage of gross sales revenue (Prototype No. 3) as factors.”
Based on this, they write that “the City should give consideration to the extent of any affordable housing requirements (in terms of the size of development subject to affordable housing requirements, the extent of an affordable housing fee, and/or the percentage of required units) are targeted to a level that would allow a proposed stacked condominium and/or vertical mixed-use development prototype to be developed with an acceptable return-on-investment to a private developer.”
They add, “The City might give consideration to affordable housing provisions that relate more directly to the type of urban scale development addressed in this report due to the extent of the overall development costs associated with such development.”
Plescia then recommends establishing a minimum sized residential or mixed-use development before imposing an affordable housing requirement, establishing an affordable housing fee that may vary depending on the type and size of a proposed residential/mixed-use development and “establishing a reasonable level for the required percentage of affordable housing units depending on the type and size of a proposed residential/mixed-use development.”
Bottom line, the city is going to look at this again. Mr. Webb notes that what needs to be taken into consideration are factors such as risk, added construction liability costs and scale.
He concludes: “It may well be that certain scales of projects may be better able to absorb affordable housing, even if at an amount lower than that of other project types. “
We should certainly take a look at a number of options. But the bottom line here, I think, is that looking at the report from 2015 and the report from this spring, the costs of construction for these vertical mixed-use projects are going to make them difficult to pencil out under the best of circumstances.
We therefore have a tradeoff. If we want to have infill and densification, we are going to have to figure out other ways to build affordable housing. If we want affordable housing, going to peripheral projects with land dedication sites is the best way to do so.
—David M. Greenwald reporting
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So, residential/mixed-use development prototypes without any affordable housing requirement would either be “likely” or “possible” to occur. On-site affordable housing units make such developments either only “possible” or “unlikely’ to occur.” Sounds to me like on-site affordable requirements are “possible” in either case. That certainly suggests that the current blanket exemption for residential components of vertical mixed-use developments is not justified.
That may be true. It sounds like the city might be thinking of a reduced requirement for vertical mixed use. The scary thing though, is looking at the overall numbers for mixed use and densification projects, it’s not all that encouraging.
There is a large vertical mixed-use proposal (which is still in an early stage) at University Mall.
As you said “large” – that’s pretty much whether the economy seems to lie.
The affordable housing requirement is just one of the many costs or exactions that the City imposes upon development projects. If the total amount of those exactions is too great, projects won’t be financially feasible, but it doesn’t really matter which of those individual exactions were the ‘final straw’ that killed the project. If an affordable housing requirement is a priority for the community, then in order to keep projects feasible we would simply need to reduce or remove some other exaction to compensate. Our discussion should focus on prioritizing the entire list of City demands, not this ad hoc approach of considering them in isolation.
I see five alternatives here:
1. Reduce the affordable housing requirement for VMUs
2. Reduce other costs and keep affordable housing requirements the same
3. Increase the size of the project (although note this is no affordable component for U-Mall per Ton’s comment)
4. Find external subsidies
5. Don’t build vertical mixed use (which I think is at the core of some people’s agenda).
Perhaps we should (honestly) explore the reasons that some want to add significant residential development to the downtown and other commercial areas. (Seems like it’s primarily driven by developer preference for more housing, not commercial development.)
On a related note, here’s an article regarding a new, struggling mall on Market Street in San Francisco:
https://www.sfchronicle.com/politics/article/At-SF-s-Mid-Market-6X6-mall-street-life-is-an-13170003.php
I don’t think that the difficulties filling a multi-story retail center in a blighted urban downtown redevelopment district has a lot of relevance to any of the general proposals that have been discussed for downtown Davis.
So you’re suggesting that people are pushing for housing, because they want housing? Seems like odd reasoning to me.
David: I have no idea what you’re asking, or its relationship to our comments above.
I wasn’t asking anything. You did modify your comment after I responded (or while I was responding), my comment was a bit sarcastic. You wrote: “Perhaps we should (honestly) explore the reasons that some want to add significant residential development to the downtown area. (Seems like it’s primarily driven by a desire for more housing, not commercial development.)”
I responded that people are pushing for more housing because they believe we need more housing. I’m not sure why you find that a novel concept.
Well, development interests are certainly pushing for more housing (above and beyond SACOG requirements, the city’s 1% growth cap, all of the new student housing developments that have recently been approved, the Cannery, Chiles Ranch . . .).
Your comment reinforces the point, that the push for more residential development downtown and in other commercial areas is being driven by developer residential interests, not commercial interests. And, is supported by those like you, whose views are aligned with those interests.
Note that you’re the one who brought up “agendas” (above), in the first place.
Take a look at that article I posted, which notes that the new mall in San Francisco is struggling despite all of the new residential development, nearby.
The Neo-Penciloutarians should, ASAP, declare their desire for being on the receiving end for lotsa lawsuits against a New Davis Downtown with no affordable housing…
No, that’s not enough, I think we’ll need to plan some self-immolation at Council meetings in order to get the right amount of attention.
Wildhorse would be a nice place for subsidized housing.
Wildhorse already has it.
Keith, really, where exactly? I’d like to go see it for myself.
http://www.mutualhousing.com/yolo-communities/moore-village/
Thanks, Don. I didn’t know. Any idea where we could find out what are the income requirements, say, for a family of four? They are very cagey about that.
I think it’s pretty complicated. Here’s info for Terracina at Wildhorse: https://affordablehousingonline.com/housing-search/California/Davis/Terracina-at-Wildhorse/10024717
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