Guest Commentary: Erroneous Assumptions and Hyperbole Are Used to Justify WDAAC’s Illegal Affordable Housing Program

by Alan Pryor

In yesterday’s column entitled “My View: Unintended Consequences – Will Anyone Go above the Affordable Housing Requirements Again?, David Greenwald made a number of unsubstantiated and erroneous claims about whether the City’s current affordable housing requirements were met by the West Davis Active Adult Community project.

Mr. Greenwald claims these City’s minimum affordable housing requirements were more than met by the developer and chastised opponents of the project for making a number of “misleading” or “inaccurate” statements.

As reported by Mr. Greenwald in yesterday’s column,

What we see at WDAAC is that the developer would have been required to build around 84 units in order to reach the 15 percent threshold.  The developer could have avoided much of this kerfuffle by simply donating 1.25 acres of the land, the minimum required and then pumping additional money just like Sterling did to help them build the housing.

 The result is that the developers would have met the minimum 15 percent affordable housing requirements.  They would have had a cash contribution in there to assist with building the project.  And this attack by the opposition would not have occurred.

….

“Instead of 1.25 acres, they’ve donated around 4.25 – which means by their calculation, they have made about a $2.7 million contribution over and above what they were required to do.

In addition, there will be an additional 66 or so affordable units (there were some differences in what number that was originally required, but we will use 74 for the purpose of this argument).”

The problem with David’s analysis is that it is just blanket statements of numbers presented as facts. There is no quantitative calculations to justify these claims nor references to the Affordable Housing Ordinance or the Development Agreement to substantiate these claims.

For instance, how did he calculate that 84 units were needed to reach the 15% threshold? As I will demonstrate later, I cannot replicate this number anywhere by looking at the project’s number of units and the Development Agreement and the City’s Affordable Housing Ordinance. I challenge David Greenwald to disclose quantitatively how he come up with these numbers  and reference them back to the Affordable Housing Ordinance as I have done later in this article when I make my alternative claims.

He also says the developer could have donated 1.25 acres instead of 4.25 and by donating the additional land the developer is making a contribution $2.7 million more than he is otherwise required. Where did David get the 1.25 acres number? He does not show how he calculated this number anywhere. Instead he just throws the number out there and expects others to accept it as fact. David, please provide a calculation how this number was derived and reference it back to the City’s Affordable Housing Ordinance.

And how does an extra 3 acres supposedly “donated” by the developer over and above his statutory requirements translate into a figure of $2.7 million dollars? How was that number ($900,000 per acre) derived? The stated value of the donated land used to be $1,000,000 per acre. At that time I asked if this was based on an independent appraisal. Was it based on the amount that the developer is paying for the land? Apparently the answer to both questions is “No.” The $900,000 figure was provided to him by the developer and Neighborhood Partners themselves but there is otherwise no independent verification of the veracity of these claims.

Mr. Greenwald, if you really expect others to accept these claims then you should provide some calculations as to how you derived the numbers and reference them back to the Development Agreement and the City’s Affordable Housing Ordinance. I challenge you to do so – just as I have done so throughout the remainder of this article.

I will otherwise delve into to the actual provisions of the Affordable Housing Ordinance in some detail as it currently exists to demonstrate that the developers affordable housing obligations are actually much greater than allowed under the Development Agreement in terms of the “size” and number of the “units” and/or “bedrooms” proposed.

This analysis of the actual provisions of the Affordable Housing Ordinance itself clearly demonstrates that Mr Greenwald’s claim that opponents of the project are making “misleading and inaccurate” claims is, in fact, unsubstantiated and hyperbole  – exactly as he accuses us. The readers can make their own decisions by the conclusion of this article.

Firstly, I will admit that I was wrong in some of my earlier calculations because I based them on what the developer estimated were their affordable housing obligations. I wrongly assumed that a statement by David Thompson before the Planning Commission in November of 2017 that the developer’s affordable housing obligation was only 76 “units” of 1-bedroom apartments was correct. In fact, it was far, far off as I will later show. Mr. Thompson  also stated that their plan to actually build 150 units of 1-bedroom apartments was possible only because of the very generous donation of land well in excess of the developer’s requirement to provide such land. This was also factually incorrect as I will detail in this article.

Let me explain.

The following language is excerpted from the Development Agreement between David Taormino and the City:

“Developer shall dedicate a parcel of no less than 4-acres in size located in the southwest corner of Property for the development of senior affordable housing. Pursuant to the City’s inclusionary housing ordinance, Developer is required to provide land sufficient for the construction of approximately sixty (60) affordable units or pay in-lieu fees.”

It seems that the minimum of 4 acres in size is calculated based on the City’s Affordable Housing Ordinance that states (under the section on land dedication for For-Sale development projects – see below)

”(c)    Land dedication. When a developer makes a land dedication in order to satisfy the requirements of this article, it shall comply with the following requirements:

The developer shall make an irrevocable offer to the city of sufficient land, without abnormalities (shape and terrain) and with complete environmental review, which can accommodate the land dedication requirement for the project in its entirety. The land dedicated shall be of sufficient size to make the development of the required affordable units economically feasible, no less than two acres. The density of development for the purpose of calculating the acreage to be dedicated under this section shall be fifteen units per acre. “(Emphasis added)

60 units divided by 4 acres equals 15 units per acre so the project is seemingly in compliance with this standard. Even if this is true, however, the developer is certainly NOT donating land substantially in excess of their requirement as is continually represented by David Greenwald – at least not according to the City’s calculations. The developer otherwise claims that the donated land is actually capable of accommodating 150 x 1 -bedroom senior apartments which is substantially greater than their required 60 “units” actually required in the Development Agreement. However, the developer and David Greenwald are conflating the definitions of “bedroom” and “unit” in the Affordable Housing Ordinance which, in fact, are quite different in terms of their use in the Ordinance as a careful reading would quickly determine.

As described below, a “unit” of affordable housing as defined in the Affordable Housing Ordinance for For-Sale projects (as is clearly the case with WDAAC because all of the built units are destined to be sold) is either a 2-bedroom or 3 -bedroom apartment and NOT a one-bedroom apartment as claimed by the developer and David Greenwald. If otherwise, it would allow the developer to build only 60 x 1-bedroom apartments and claim he has met his affordable housing requirements. In fact, a unit as defined in the Affordable Housing Ordinance is actually a 2- or 3-bedroom apartment and NOT a 1-bedroom apartment  as explained below.

To understand the difference one needs to understand that the City has both a permanent Affordable Housing Ordinance and temporary provisions added to the ordinance in February of this year which is scheduled to sunset on December 31^st of this year.

The full text of City’s current permanent Affordable Housing Ordinance can be found out http://qcode.us/codes/davis/. A one-page summary of this permanent Affordable Housing Ordinance can be found at https://cityofdavis.org/home/showdocument?id=10431. In this permanent ordinance there is a separate provision for a temporary substitution of the number of units or bedrooms provided by the developer.

It is a fundamental misunderstanding of this single provision in an otherwise expansive ordinance that is the root cause of Mr Greenwald’s quantitative misunderstanding of the City’s Affordable Housing Ordinance. He would do well to school himself in these details before firing off claims of “misleading and inaccurate” representation by others while he himself makes numerous unsubstantiated claims.

Before delving into the details of the WDAAC’s obligations to provide affordable housing, readers should also understand that there are differences in the affordable housing requirements for a For Sale housing development vs a Rental housing development. The WDAAC project is a For Sale housing development because all of the built homes are planned to be sold.

CALCULATION OF NUMBER OF AFFORDABLE HOUSING UNITS REQUIRED AT WDAAC

The requirements for providing Affordable Housing for For Sale housing developments are as follows (excerpted from the City’s Summary Sheet referenced above):

Looking at the total number of ownership units being built for sale in the WDAAC project, one can very simply calculate the developer’s affordable housing requirements knowing the developer is providing all For-Sale units in the project; as follows:

Note that the required number of affordable ownership units to be built by the developer under the permanent ordinance is 54 “units.” However, as further specified in the Affordable Housing Ordinance, there are minimum size requirements (in terms of the number of bedrooms) as to what constitutes a “unit, as explained below:

With regard to the type and size of the affordable “units” that need to be built, the Affordable Housing Ordinance is quite specific in discussed in section 18.05.050 Ownership development affordable housing standards, subsection (b); as follows:

“(b)    On-site construction of affordable units for ownership developments. When a developer constructs on-site affordable ownership or rental units to satisfy its obligations under this article, the units shall be constructed in conformance with the requirements of this subsection (b).

…

(2)    Housing Mix. The developer must provide a mix of two- and three-bedroom units, with a minimum of fifty percent of the units as three-bedroom units and in a combination of unit types as approved within the affordable housing plan through the appropriate review process. Smaller and larger unit sizes shall be provided as an option, based on local housing needs and project character, as approved during the affordable housing plan review process.”(emphasis added)

In the case of WDAAC, this means that if the developer is constructing for sale units of affordable homes under the provisions of the permanent ordinance, the developer must provide, at a minimum, 27 x 3-bedroom for sale units units plus 27 x -2 bedroom for sale units. This will equal a total of 135 bedrooms in 54 for-sale affordable housing detached units.

Since the Development Agreement between the developer and the City seemingly (and according to David Greenwald) only calls for the provision of 60 -1 bedroom apartment “units,” this seems to be a clear violation of the provision of the City’s Affordable Housing Ordinance if these provisions of the Affordable Housing Ordinance are applicable.

We have emphasized the phrase, permanent ordinance when discussing the developers obligation to provide a certain amount of affordable housing because the City has also added a temporary provision to the ordinance (as briefly discussed above) which is applicable only from February of this year to year’s end as follows

“b)    Alternative rental housing requirements. Until December 31, 2018, the city council may, at its discretion, approve alternative affordable housing requirements on a project specific basis that provide for a lesser percentage of the total units to be provided as affordable housing, or provide for affordable housing in an alternative manner, including but not limited to providing affordable housing by bedroom or individual bed, in an amount as deemed appropriate by the city council. Except as provided below, there shall be a requirement of fifteen percent affordable units, bedrooms or beds. (Emphasis added)

These are the provisions by which Nishi, and Lincoln40, utilized to determine their affordable housing obligations. They calculated the total number of “beds” they would be providing in their projects and 15% of those beds would be reserved for low-income students:

One can also calculate what these 15% amounts would be in terms of either “units” or “bedrooms” by similarly using the total number of for-sale units or for-sale number of bedrooms at WDAAC to calculate the alternative WDAAC affordable housing obligations under this temporary provisions of the ordinance.

For example, by looking at the total number of ownership units being built for sale in the project, the minimum required number of units for compliance with the temporary affordable housing ordinance is calculated as follows:

Thus, based on the alternative 15% calculation provided for in the temporary provisions of the Affordable Housing Ordinance, the developer would alternatively provide 57 Affordable Housing “Units” and these would still be required to comprised of the specified mix of different size of apartments – 29 x 2-bedroom and 28 x 3-bedroom units.

This is actually a greater number of “units” than the 54-”unit” otherwise calculated above when utilizing the permanent portions of the Affordable Housing Ordinance to make such a determination as  shown above. As noted, however, construction of these 57 “units” under the temporary 15% provisions of the Affordable Housing Ordinance must still comply with the definition of “units” in the permanent portion of the ordinance. Thus 57 “units (comprised of a mix of 29 x 2-bedroom  and 28 x 3-bedroom units )  would actually require a total construction of units with of 142 Affordable Housing “Bedrooms” in these 57 units. Confused? I was too until I went through the numbers myself over and over and put them into spreadsheets to make sense of them.

Alternatively, under the provisions of the temporary portion of the Affordable Housing Ordinance allowing the calculation of the 15% requirement based on the number of “units” OR “bedrooms,” the developer could instead calculate their affordable housing obligation utilizing the 15% requirement based on the number of “bedrooms”; as follows.

Either way, the developer’s obligation is substantially greater than the 60 units of one-bedroom apartments (equally only 60 Affordable Housing “Bedrooms”) presumably required by the City in the Development Agreement. I am still not sure how David Greenwald came up with his calculation that the developer must “build around 84 units in order to reach the 15 percent threshold.”

Because the Affordable Housing Ordinance seemingly requires provision of either 142 bedrooms in 57 units (if calculated based on 15% of the number of “units of a mix of 2- and 3- bedroom apartment)  or 180 bedrooms (if based on the calculation of 15% of the number of bedrooms constructed in the project, the requirement in the development agreement that 60 1-bedroom “units” satisfies the developers affordable housing requirements is a clear violation of either the permanent or temporary provisions of the City’s Affordable Housing Ordinance.

Now this temporary subsection only pertains to affordable rental housing requirements under 18.05.060 Rental development affordable housing standards.

However, because the Affordable Housing Ordinance specifically allows the affordable housing obligations of a For Sale development to be satisfied by meeting the requirements of the Rental development section of the Affordable Housing Ordinance (see below), it appears these temporary affordable housing requirements (i.e. the 15% optional method of calculating the affordable housing requirements) are applicable to the WDAAC even though the WDAAC is a For-Sale rather than a Rental project (such as clearly is Nishi or Lincoln 40)

ALTERNATIVES TO BUILDING THE AFFORDABLE HOUSING UNITS OR BEDROOMS REQUIRED AT WDAAC

Now it is clear that the Affordable Housing Ordinance does allow developers other options to satisfy their For-Sale affordable housing requirements instead of just providing affordable units for purchase:

“(C)   Projects Totaling Two Hundred One Ownership Units or More. The required affordable units shall be provided through the following methods, as more specifically described in subsections (b) through (f):

(i)     On-site construction of affordable ownership units;

 (ii)    On-site construction of accessory dwelling units for rental to fulfill up to half of the requirement;

 (iii)   Through payment of in-lieu fees for no more than fifty percent of the affordable housing obligation of the project, if approved by the city council;

 (iv)   Provision of a land dedication site; and/or

 (v)    On-site construction of affordable rental units, if the developer voluntarily requests to satisfy its requirements through this alternative.”

We will explore each of these options one-by-one to see if the WDAAC developer has met their affordable housing requirements.

(i)     On-site construction of affordable ownership units;

 The developer has clearly chosen not to build his own affordable housing units.

(ii)    On-site construction of accessory dwelling units for rental to fulfill up to half of the requirement;

While the developer is “proposing” to build about 16 accessory dwelling units, their construction is not required in the development agreement nor is their any requirement that these ADUs be rented. Further, even if their construction was required in the Development Agreement and it was required that they be rented, these would only reduce the developers bedroom requirement by a total of 16 “bedrooms” (equivalent to only 8 x 2 bedroom units) because ADUs are considered only to be equivalent to “one-bedroom.”

(iii)   Through payment of in-lieu fees for no more than fifty percent of the affordable housing obligation of the project, if approved by the city council;

The in-lieu payment fee is $75,000 per “Unit” for For-Sale developments. The developer has tacitly acknowledged that they are operating under the assumption that their affordable housing obligation is 15% of the “Units” and not the bedrooms. Thus, the in-lieu payment fee should thus be $2,100,000 ($75,000 times half of the units (28) plus the developer must build out the remainder of the required units with half of those being  3 -bedroom and half being two bedroom per the ordinances 50% required than no less than half the units be 3 -bedroom units.

However, the developer is putting in only one-bedroom apartments which are clearly not allowed under the affordable housing requirements of For-Sale development so the developer has abandoned this option of providing his affordable housing requirements.

(iv)   Provision of a land dedication site; and/or

 “(c)    Land dedication. When a developer makes a land dedication in order to satisfy the requirements of this article, it shall comply with the following requirements:

The developer shall make an irrevocable offer to the city of sufficient land, without abnormalities (shape and terrain) and with complete environmental review, which can accommodate the land dedication requirement for the project in its entirety. The land dedicated shall be of sufficient size to make the development of the required affordable units economically feasible, no less than two acres. The density of development for the purpose of calculating the acreage to be dedicated under this section shall be fifteen units per acre.” (Emphasis added)

The donation of land using the 15% calculation is the option apparently chosen by the developer to satisfy their low income housing obligations. However, because their non-profit developer has chosen to install one-bedroom rental units instead of the mix of 2- and 3-bedroom units otherwise allowed under the Permanent, For-Sale sections of the Affordable Housing Ordinance, the land dedication provisions of the Rental section of the Affordable Housing Units would instead be applicable in determining the amount of land required to fulfill the land dedication alternative available to the developer.

Under the provisions of 18.05.060 Rental development affordable housing standards, the land dedication requirements are as follows:

“(d)    Land dedication. A developer may, as an alternative to constructing the affordable rental units on-site, make an irrevocable offer of dedication to the city of sufficient land to meet the total affordable rental housing units required pursuant to this section.

(1)    Credit. The density of development for the purpose of calculating the acreage to be dedicated under this section shall be twenty units per net acre for multifamily residential use.” (Emphasis added)

In the absence of any other applicable provisions in the Affordable Housing Ordinance, this would seemingly also apply to the affordable senior rental apartments apartments in questions.

Calculation of the land dedication requirements of this provision of the Affordable Housing Ordinance would thus seemingly require the dedication of 9 acres for the 180 x 1 bedroom “units” ( 180  units divided by the minimum of 20 units per acre of land dedication = 9 acres of land dedication).  This compares with the 4.25 acres of land actually dedicated by the developer and David Greenwald’s otherwise completely unsubstantiated claim that only 1.25 acres is actually required.

Thus, I believe the Development Agreement between the City and the Developer calling for the minimum 4 acres of land dedication for 60 “Units” are a clear violation of the Affordable Housing Ordinance.

It seems that Davis Greenwald, the developer, and the City are all otherwise confused (as was I before doing the detailed research necessary to write this article) about the differing requirements for Affordable Housing for For Sale “units” and Rental “units” and the difference between “units” and “bedrooms” with respect to the 15% requirements in the temporary provisions of the Affordable Housing Ordinance’s calculations of affordable housing requirements.

Perhaps if Mr. Greenwald still believes that the opposition’s claims about the inadequacy of the Affordable Housing requirements offered by the developer are “misleading and inaccurate,” he could quantitatively demonstrate how this is so instead of generally making unfounded accusations on the developer’s behalf without quantitative substantiation.

POTENTIAL WAIVERS FROM PROVISIONS OF THE AFFORDABLE HOUSING ORDINANCE BY CITY COUNCIL.

Now I will grant that even though I believe these affordable housing requirement provisions in the Development Agreement are in direct violation of the Affordable Housing Ordinance, I will concede that the City Council can waive these requirements and essentially do whatever they want. However, there is a very rigidly prescribed process for such waivers including procedures and findings which must be followed if such waivers are to be legal. In the case of the WDAAC project, the process of entitlement was so rushed to get the project to the November ballot such that the process of waivers was completely abandoned.

“18.05.080 Exemptions from affordable housing requirements.

…

(d)    The requirements of this article may be adjusted or waived if the developer demonstrates to the satisfaction of the city council that there is not a reasonable relationship between the impact of a proposed residential project and the requirements of this article, or that applying the requirement of this article would take property in violation of the United States or California Constitutions.

 To receive an adjustment or waiver, the developer must request it when applying for first approval of the residential development, or through submittal of a draft affordable housing plan to the city. The matter shall be considered before the city council within thirty days. In making the finding or determination, the city council may assume the following: (1) the developer is subject to the inclusionary housing requirements in this article; (2) availability of any incentives, affordable financing, or subsidies; and (3) the most economical affordable housing product in terms of construction, design, location, and tenure. For purposes of a taking determination, the developer has the burden of providing economic and financial documentation and other evidence necessary to establish that application of this article would constitute a taking of the property without just compensation.

If it is determined that the application of the provisions in this article would constitute a taking, the inclusionary requirements for the residential development shall be modified to reduce the inclusionary housing obligations to the extent and only to the extent necessary to avoid a taking. If it is determined that no taking would occur by application of this article, the requirements of the article remain applicable and no approvals for the residential project shall be issued unless the developer has executed an affordable housing plan pursuant to the requirements of this article. (Ord. 2418 § 1, 2013)”

None of these provisions for obtaining such a waiver have been completed by the developer or Council so any such waivers granted by Council are illegitimate.

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