By David M. Greenwald
Executive Editor
Davis, CA – After several go-rounds on the Housing Element, staff has come to the council and asking them to approve the Revised Final Draft Housing Element on Tuesday.
“Staff recommends the City Council adopt the Revised Final Draft Housing Element at the August 31, 2021 meeting as proposed or with City Council supported edits to allow the document to be finalized for submission to the Department of Housing and Community Development (HCD) prior to the September 12, 2021 statutory deadline,” staff writes.
But staff also notes: “Staff supports the Planning Commission having further discussion on a number of these items which could be addressed in standalone policies or grouped as a recommended future amendment to the Revised Final Draft Housing Element.”
The Planning Commission on a 5-1-1 vote recommended approval of the final draft but also “scheduled a meeting on September 22, 2021 for further discussion and consideration of amendments to the Housing Element.”
Staff highlights three specific items that the council “may wish to confirm support for inclusion.”
First, a number of people have registered support for a policy whereby the city would “identify and implement more robust sources of funding for affordable housing to be put into the housing trust 
fund.”
Second, the inclusion of the Social Services Commission in the participation of the affordable housing ordinance.
“One of the Social Services Commission’s purposes is to evaluate affordable housing proposals. Staff intends to have the Social Services Commission review and make a recommendation to the City Council in the adoption of the updated affordable housing ordinance. Staff is supportive of this clarification and recommends modifying the document accordingly to provide this clarification,” they write.
Finally and perhaps most significant consideration of putting a package of housing policy initiatives on the ballot.
These would include a property transfer tax that “could be used… to support programs to address housing and homelessness through our existing Housing Trust Fund.” Second, amend language that exempts from public vote “projects that provide affordable housing or facilities needed for City services.”
Finally, “Extend and expand, as long and as much as possible, the legal authority under Article 34 of the State Constitution for the City to develop public housing that would otherwise expire in 2025.”
Among other issues that drew consideration, was a discussion in the Planning Commission that was concerned about counting 105 income-restricted units for the Residential Sites Inventory.
“The concern is that the project’s affordable housing plan states that the income-restricted beds would only be available to students demonstrating financial need,” staff writes. “Therefore, rental to only students would be a violation of those laws. Ultimately, the Planning Commission recommended the elimination of the Nishi project affordable housing from the Residential Sites Inventory.”
Staff responds: “Based on the professional experience of staff and the consultant team, the 105 income-restricted units listed under the Nishi project in the Residential Sites Inventory meet HCD’s criteria for inclusion on the inventory.”
Staff concludes: “The City Council certainly has the option of accepting the recommendation of the Planning Commission to remove the Nishi units from the Residential Sites Inventory. However, it is important to understand the impact of doing so, as these units represent approximately 18 percent of the City’s RHNA obligation for Very Low-Income units for 2021-2029.”
The Planning Commission also recommended that the Social Services Commission Housing Trust Fund proposal draft be a, “standalone program and not incorporated into Housing Element Program Action 2.2.1.”
Staff believes, “there is no reason to remove the programs from the Housing Element, as having them documented in the Housing Element would not hinder the Housing Trust Fund in any way.”
Members of the Planning Commission also noted concerns that “the Housing Element does not go far enough or is not aggressive enough to aid in developing affordable housing in Davis.”
There is also the belief that the Housing Element should have been done prior to the Davis Downtown Plan.
Second, amend language that exempts from public vote “projects that provide affordable housing or facilities needed for City services.”
There needs to be a threshold added to this idea. The concern is that if the affordable housing included in the project is a negligible portion of the project then the project would not be contributing to affordable housing in the City in any meaningful way, and therefore should not qualify for the exemption. Deciding where the threshold should be in order for the project to qualify as a “meaningful” contributor to affordable housing in the City will be an interesting discussion by the Planning Commission.
Without the threshold this exemption will simply be an end run around Measure J/R/D.
The same kind of “meaningful contribution to” threshold should apply to “facilities needed for City services.”
On August 17th I sent the following e-mail to the City’s CFO Elena Adair, with copies to the FBC members, City Council, City Manager Mike Webb, Principal Planner Sherri Metzger, and Barbara Archer illuminating significant data integrity problems in the Draft Housing Element report.
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My original e-mail to CFO Elena Adair and the FBC, with copies to City Council and City Manager Mike Webb, illuminating the data integrity problems with the CAFR was sent to them on May 10th, and read as follows.
Really interestng what you have pointed out with that data Matt.
I have had a thought popping around in my head for the last few months, I dont know if I mentioned this to you already… but I think the city should invest in a cell phone data location survey… which could answer a lot of these questions with a surprising amount of accuracy:
How many people live AND work in davis?
how many people work in davis ( not on campus ) and have to commute in?
How many people treat davis as a bedroom community and work in sac or elsewhere?
The people clogging up the Mace exit – are they leaving town because they work here and live in Sac? or are those people who got off the freeway to get around traffic elswehere?
The kinds of insights we could attain if we used cell tracking data are immense. Its a little bit creepy and “big brother” which I acknowledge… so it has to be done right and with some discretion, but it is clear to me even from debates on the vanguard that people operate with VERY different sets of assumptions about things like whether or not the lack of housing is even a problem… If we have low quality data like what you have pointed out, how are city officials supposed to make actionable decisions?
I think we can do a lot better using that cell phone data. The census is a pretty blunt instrument for these purposes.
Tim, as follow-up to my e-mail I received the following from another Davis resident.
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I can easily see your cell phone data idea being incorporated into the scope of work of the “researched, vetted and affirmed by a leading economic consulting firm” activity that is called for in the e-mail.
I believe this is really important as a first step in the City actually having an actual Economic Development Plan that guides its economic development activities, as well as provides a “landscape” for assessing whether development proposals contribute positively to that Economic Development Plan. Right now the development assessment process is pretty much an ad hoc lick you thumb and put it up in the air to see which way the wind is blowing process. That breeds a whole lot of distrust in the voting public, as well as producing seriously flawed projects like The Cannery.
@Matt
Is the data about UCD employees:
1. The total number of UCD employees?
2. The total number of employees that UCD employees that live in Davis?
3. The total number of employees that work inside the city of Davis for UCD?
What is the application of the data? Is what your tracking the same as what the Housing Element Document is trying to track with the UCD Davis employee data?
If we’re tracking the total number of employees that work inside the city of Davis for UCD; what is that fiscal impact on the city? Does UCD pay business taxes to the city (or are they exempt as a non-profit entity?) for the in-city work locations? They pay property tax at least (though once again the meager amount the city gets from the county doesn’t really make this a huge plus). The workers weather they work at UCD on campus or at UCD city sites….it’s not like the city gets to tax their income either way.
This is interesting. MuniServices is an out of town subsidiary of a larger corporation. It’s pretty clear that they don’t understand the local situation and just started pulling numbers under the assumptions that (1) UCD was inside the city limits and (2) either the medical center is on campus or not even aware of the medical center as a separate operation. Having seen other consultants make mistakes like this in unfamiliar jurisdictions, it wouldn’t surprise me. However, the City staff should be familiar enough with the situation to have noted such a large discrepancy and asked MuniServices to go back and redo their analysis.
I thought that only charter cities could enact property transfer taxes above the current level.
While I’m happy to hear some funding has been set up for future affordable housing and shelter. I’m disappointed that the solution is a property transfer tax. Someone correct me if I’m wrong but essentially you’re funding these affordable homes by jacking up the costs (not value) of market rate homes that will be sold to likely new residents looking to move to Davis….or current residents looking to buy a home. I guess it’s nickel and diming the transaction (how much will the property transfer tax be?). Is there a projection of how much property transfer tax revenue there will be for the city? The part I’m cautious about is “COULD be used to support…..”
I’d much rather support affordable housing through economic expansion. Increase sales tax revenue, business tax revenue and commercial property tax revenue.
Depends on the size of the transfer tax. Most of the homeowners of Davis are sitting on huge unrealized capital gains that have been made even larger through restrictive supply policies. A transfer tax could be a reasonable way to raise money to fund Affordable Housing.
But you’re not taxing homeowners. Correct me if I’m wrong…but it’s not a property tax that taxes homeowners. It’s a property transfer tax; you’re taxing the people buying/receiving the homes.
If it reduces affordability and depresses prices however slightly it reduces the capital gain.
In general, the sales price is determined by a combination of underlying supply cost and the willingness to pay through demand. The incidence of the tax is determined by the relative elasticity of supply versus demand, so we can’t determine who pays what share of that tax without knowing more about the elasticity of each. We don’t have that information here, so we can’t determine the relative incidence of a property transfer tax a priori.
lol….that’s like asking: “What made the plane crash?”
You: “Gravity”
Davis is a general law city. It can impose a property transfer tax up to .55 per $1000 and presumably already does so. The county can also charge this tax up to $1.10 per $1000. Charter cities can impose whatever rate they want, and you can see what they charge here: http://www.californiacityfinance.com/PropTransfTaxRates.pdf
So unless Davis changes to a charter city, which has a lot of other complicating issues, this is not even a point of discussion unless something has changed recently.
Don, my point wasn’t about if and to what degree the transfer tax is imposed. My question about the transfer tax was more academic (and thank you for answering it) because I was curious. My point was that I’d prefer that funding for affordable housing and other things for the city come from economic expansion and not taxing perspective home buyers…..thus increasing the cost of market rate housing in Davis.
Keith, I believe the tax is paid the home seller rather than the home buyer. It is netted out of the sale prceeds before the final check is written to the home seller.
I could be wrong about that though. I’ll be interested to hear more from sources more informed than I am.
Thanks Matt,
But most brokers/sellers are going to look at what they expect net out of the transaction. So they will adjust their selling price to reflect the extra fees/taxes. Bottom line is that expenses are going to be passed down to the buyer as much as possible….even when they’re not a line item on the transaction report. I suppose you could argue that in the end the overall home price (including taxes and fees) are going to be haggled over and the buyer and seller are going to absorb some percentage of those costs.
Keith, you recently were arguing that if people can’t afford Davis they shouldn’t buy in Davis. Yet you oppose a marginal tax to help build the Affordable Housing you also support. I would argue that if you can’t afford a marginal one time transfer tax you can’t afford to buy in Davis.
Point well taken Ron.
Matt…
In San Mateo County, at least in 2002, you are absolutely correct… San Mateo is a charter city, so I (actually, the Trust) as seller paid it… some might argue that the price we negotiated, passed it on… that’s stupid and silly… and we had the same broker for both buyer and seller, so I saved 2-3 X the tax on reduced broker fees/commission (talk about a “tax” that adds no value… not based on actual cost [like a fee would be] but a fixed %-age – which smells like a ‘tax’, to a private enterprise).
Without looking it up in my records, I recall it being ~ 1/4 of San Mateo County Property Transfer tax, or ~ 0.25 %. Given the value of properties in the City of San Mateo, and turnover, the total collected is not huge but is definitely significant.
So, Matt, I’m backing your play, from experience.
Some charter cities now have that tax at $12 per $1000.
Where did I say I opposed it? It’s not an onerous tax. I suppose it’s okay as a incremental step or maybe temporary means of funding affordable housing. But in principle I believe the way to fund social services, infrastructure…etc…is through economic expansion not further taxing home owners…or even worse slapping fees on perspective homebuyers. Yes people should live where they can afford to live. But adding ever increasing taxes on people when there are alternatives is not something I support. So my two views aren’t mutually exclusive.
@Bill Marshall
Why is that stupid and silly? You don’t think a seller would pass on as many expenses and fees as possible? You’re basing your knowledge on your personal little real estate transaction????
Just checked, City of San Mateo (2021-2022) budget:
Property Transfer Tax revenue is ~ 8.5 Million, out of ~249 Million dollars total revenue… ~ 3.4%
I hope they don’t put a tax and a re-write of the Measure D Affordable exemption on the ballot as one item as taxes are hard to pass.
As to rewriting the Affordable exemption the devil will be in the details. It will be interesting to see what they come up with and if it can withstand the criticism that it will create peripheral ghettos surrounding Davis.
Davis has a history of distributing Affordable Housing throughout the community. Will another unintended consequence of Measure J and its successors be a concentration of Affordable Housing on the periphery and a change in the spatial landscape of Affordable Housing in the community?
I previously posted about SB 35 which makes it far easier in terms of politics (but not financial) to build infill affordable housing. In Davis (and many other non-complying regions with the RHNA), if the project is more than 50% affordable housing and meets city zoning…it basically gets rubber stamped with approval without any other input from council, staff or the unwashed masses.
The transfer tax proposal needs clarification. Davis is a general law city.
https://listwithclever.com/real-estate-blog/california-real-estate-transfer-taxes-an-in-depth-guide/
California Real Estate Transfer Taxes: An In-Depth Guide for 2021
Updated March 3rd, 2021
https://www.deedclaim.com/california/documentary-transfer-taxes/
https://schorr-law.com/5-types-of-real-property-taxes%EF%BB%BF/#4_Property_Transfer_Tax_for_Charter_Cities
Don,
Do you favor the Charter City model or the General City model? It seems to me that most of the criticism of the Charter City model is that it can place too much power in one area, person or office than it should…which can disrupt the flow/process of governance compared to how it was under the General City model. I’ve read that often times special interests groups get involved in the creation of the city charter that can further pollute the flow of proper governance (at least compared to the general city model).
But do you believe the ability to enact a higher property transfer tax is worth it?
I opposed the Charter City proposal that the city voters considered a decade or so ago, and spoke out against it at that time. I believe it allows the city council to raise taxes too readily on too many things, and has other complications as well. Supporters of choice voting (I’m not a supporter) strongly supported it at the time because it was a necessary step for enacting that.
Could be… San Mateo County had a PTT of 1%… add the City’s $2.50 per $1000, and that equals $12.5per $1000. Would be interesting to know if the Counties the cities you cite are in, have PTT…
Given current turnover rate of property (particularly “commercial”, where the big bucks are) in Davis, would be surprised if it mattered much either way. And to pint out the obvious, again, the MF properties and other commercial properties bear the lion’s share of PTT. Not SFR.
This is an interesting point. Is there high turnover for commercial property in Davis? It seems like there’s an awful lot of it that goes vacant for periods of time. Meanwhile single family homes are selling like hotcakes. I do not know how multi-family is doing. I’m not disagreeing with the comment about commercial being where the big bucks are for property transfer taxes. But I’d be interested in learning more in detail about Davis’ real estate market.
I was informed by the city that a charter could be created simply for the purpose of the transfer tax and the rest would revert to general law rules. In other words, it would not necessarily open a door if the city didn’t want it to.
I know what your answer will be, but will you cite your sources? Better include the City Attorney…
As it stands, am not “buying it”… not without verifiable sources, including AG opinions, text of State Law, etc.
I think you’re ‘reaching’… for what purpose, I cannot fathom…
I believe that the charter city conditions could then be changed by a simple majority vote of any subsequent city council. But I would have to verify that. I suppose it depends on how it’s worded. I suspect that fervent choice-voting supporters would instantly seize on this opening and seek to push that through.
Not unless the Charter is stupidly written.
Charter City status, must be voted on by the voters… NOT CC!
By the same token, any substantive changes are also subject to vox populi, NOT CC…
You’re right, I found my old notes on this. The residents of Berkeley have voted many times to amend their city charter. A great recipe for public engagement and/or civic dysfunction, IMO.
You have it correct, Don, in my experience/opinion. Charter status can be a two edged sword. Seems to have, and continue to work pretty well for San Mateo, and, for the most part, Sacramento.