One of the big questions facing the city is why they are not getting any market rate multi-family projects anymore that have 35 percent affordable units, as required under the city’s affordable housing ordinance.
At the city council’s workshop back in October, they discussed the possibility that 35 percent is simply too high a requirement to get anything built.
As Councilmember Rochelle Swanson said, “I think the financials are going to dictate that.”
At the time, she suggested that staff reach out to those building the projects to find out what some of the key financing issues are.
“Thirty-five percent of zero is still zero,” she said, referring to the fact that if the units are not built because of the requirements, we get no affordable housing. “It should probably be lower than (35 percent) so that we do see it being built.”
That is the problem that the city faces – we need more affordable housing, but consistently developers and even some affordable housing experts have warned that if the city is setting too high a standard, it could be self-defeating.
But of course we cannot just take the word of developers and builders, and so the city has done the right thing by hiring a consultant, in this case Andy Plescia, to assess what is reasonable.
Robb Davis has asked that staff find out “what has changed.” In particular, why 15 years ago was the city getting projects that had 35 percent affordable housing, but in the last 15 years we have 
not?
There is a general belief that the result will be that Mr. Plescia, when his report comes out perhaps in January, will recommend, as will staff, to reduce the threshold. That invariably means that the city and council will be attacked, but the reality is that housing must include realistic affordable requirements. If the current standards mean that nothing at all gets built – then they are self-defeating.
As Mayor Davis said in October, “[I]f our affordable 35 percent (requirement) is meaning that people are not going to build them, then it is time to review that.”
It may be that reducing some of the requirements for affordable housing counter-intuitively means that we get more affordable housing in the long run because it allows more projects to be built, even if those projects have a lower affordable housing requirement.
But some have pointed to the fact that new projects have emerged as proof positive that the current standard works.
But does it?
Sterling presented 198 units, of which 38 were affordable. That comes to just over 19 percent. It is harder to calculate Lincoln40 which will have 71 affordable beds integrated into its 130-unit, 708-bed complex, but clearly that number comes to well short of 35 percent, any way you measure it. Even assuming that the affordable units comprised just the two- and three-bedroom apartments, you still get about 11 percent at the lowest end and, at the high end, 20 percent.
Finally, Nishi is only proposing about 11-12 percent affordable units.
According to the staff report: “While the applicant has not finalized unit density, unit type, or unit totals, the applicant based its affordable housing calculation on a 1,900-bed total of which 1,696 would be market rate beds and 204 would be affordable units.”
The need for these projects to generate new affordable housing and money for affordable housing is understandable. As we have pointed out numerous times, there are two key factors here.
One is the change in the type of development in Davis. As Robb Davis noted in October, in the past the city built larger housing developments which enabled them to have relatively large dedicated sites to build large “a” affordable housing.
“Those days now largely are done,” he said. “We aren’t getting any large developments like that that lead to that kind of ability to create the affordable set aside inside.”
The second is the disappearance of Redevelopment Agency (RDA) funding and the $2 million a year that used to come from that.
The key then may be to find other funding sources, so that the city can move away from using existing developments either to build the housing directly or create a fund through in-lieu fees.
“Just do away (with) in-lieu fees in my opinion,” he said, but we need to find a revenue stream and then set in-lieu fees really high to disincentivize their use.
And here we may have some promising avenues.
One avenue is with the state – and while they will not replace all the $2 million annually that came from redevelopment, it is a start.
Recently the state has created a funding source through SB 2. Sponsored by Senator Toni Atkins, SB 2 would created a permanent funding source for affordable housing by imposing fees up to $225 on certain real estate transactions. It is expected to collect $1.2 billion annually over the next five years, creating a $5.8 billion fund. Also SB 3 would place a $4 billion housing bond on a future ballot that would pay for existing affordable housing programs in California that used to be supported by funds from the state’s RDA.
But the city is also looking for local funding, as those affordable housing programs are still not expected to entirely replace RDA.
The city is also looking at potentially $500,000 to $750,000 to come from its proposed social services tax.
If the voters are willing to pass the measure, the city could have three key sources for affordable housing, two of which are new – one would be new development, one would be state money, and the third would be the parcel tax.
Combined, that could be enough to provide a new supply and maintain the current supply of affordable housing now and into the future.
—David M. Greenwald reporting
While there’d be less returns later, a great way to decrease the cost of construction of housing is to eliminate parking, beyond a couple spaces for ADA, carshare and for people in certain professions (like first responders). Combined with transit incentives, electric-assist supermarket shopping and kid drop off bicycles and robust parking permit expansion, there’s be no small “c” cheating and lots of big “J” Joy. There’s enough demand for housing that – minus the parking amenity – new mixed-income housing would still be very, very attractive.
Where would the residents park their cars, TE?
“robust parking permit expansion” excludes this possibility, at least in the immediate area or another one where parking is already congested, excepting the three types I mention above who can park on site. The developer provides residents with a certain free amount of public transport including bike share, electric cargo bikes shared by residents, Zipcar memberships… all of this is much less expensive than building parking spaces.
So where would the residents park their cars?
David… do you know where the 35% came from%? [only question for David, the rest are rhetorical…]
I don’t.
Was it by law? Arbitrary decision by City? Staff members’ idea/personal belief?
Why not 15-20-25-30 percent? Why not 40-50-60-70%? [or higher?]? Vote of the people?
Meant as honest question…
I don’t know where it came from – that’s a good question though.
What is the status of the 35% — is it a legal requirement? If it is, then why are we entertaining proposals that don’t meet it?
The 35% requirement is a legal requirement but it says “to the maximum extent feasible,” leaving wiggle room to negotiate.
Thanks. That makes the responsbility clear.
As to keeping rents affordable:
So, bottom line: requiring affordable housing in rental developments is pointless.
Thank you for the additional information, Don. So why did the City make the effort to pass the ordinance, then?
I have no idea. Perhaps they were waiting for the case to be overturned? “Palmer fix” legislation passed and was signed by Gov. Brown, but it doesn’t allow them to control the rents.
https://landuse.coxcastle.com/2017/11/02/inside-ca-legislatures-housing-package-palmer-fix/
Perhaps Eric Gelber can help us out here. If you can’t mandate the rental cost of the housing once it’s built, how does the city actually achieve affordability in a rental development project?
In September, the Governor signed AB 1505, through which the Legislature expressly declared its intent to supersede the Palmer decision “to the extent that decision conflicts with a local jurisdiction’s authority to impose inclusionary housing ordinances.” The Legislature sought “to reaffirm” local agencies’ authority to apply affordable housing requirements to rental projects. To do so, AB 1505 specifies that cities and counties may adopt ordinances that “require, as a condition of the development of residential rental units, that the development include a certain percentage of residential rental units affordable to, and occupied by,” households at or below moderate-income levels. AB 1505 requires inclusionary housing ordinances to provide alternative means of compliance that may include in-lieu fees, land dedication, off-site development of units, or rehabilitation of existing units.
So, then, we are back to it being the City Council’s responsibility to enforce its own ordinance.
I still don’t understand how any percentage housing requirement can be effective in the absence of controlled rent. So the 35% requirement does not make sense to me. The other options specified seem like the only enforceable methods.
A plain reading of the code cited, could mean 25% of total have to be affordable… and 10% of total have to be affordable on the low end… it is not clear at all that it is “additive”… so, it can clearly be parsed as 25% affordable, with the 10% within that 25% at the low end, but it is apparently being parsed as 25% + 10% getting to the 35%… I question the reason for parsing it the second way… looks like it is a local ‘preference’ to parse it that way…
Based on what was cited, looks like 25% affordable (total), but with no less than 10% affordable on low end…
Why would they, since the city has already demonstrated that they’re willing to “overlook” the requirements?
Not much of a “mystery”, here.
Good question. Actually, I believe there was a shortage of any proposals, during the multi-year recession.
Another question: How many sites should the city convert (e.g., from commercial to residential) to satisfy the “need” (largely created by UCD)?
And, how dense should the city ultimately become (Affordable, or “non”-Affordable)? Is there an ultimate “goal”? Or, are we sticking with “planning via vacancy rate”, regardless of consequences?
And yet, we have more than two proposals on large sites (including Nishi, and Sterling – which was approved):
If I’m not mistaken, the two commercial sites in South Davis that are being proposed for housing are around 7 acres, each. Is that correct? Not sure how large the Lincoln40 site is.
5 acres