Current system isn’t working, officials say
(Editor’s note: This is the first part in a two part series examining affordable housing in Santa Monica. The first part looks locally, while the second part examines what’s being done at the state level.)
By Andrew H. Fixmer
Daily Press Staff Writer
Santa Monica next year is projected to build only a fraction of the affordable housing required by city law, a recent report shows.
Despite a voter mandate that 30 percent of all new multi-family housing must be deed-restricted for moderate to low-income families, only 9 percent will be built next year, housing officials predict.
Last year, 27 percent of all new housing in Santa Monica was affordable and this year it’s estimated the city will build exactly the 30 percent required.
The number of building permits filed for new affordable housing projects for the upcoming year has fallen steeply, indicating a dramatic drop in new affordable housing development.
While Proposition R doesn’t punish the city for failing to meet its requirements, officials have tried to shape the city’s affordable housing policies to meet its demands. The language in the ordinance doesn’t provide any penalty for not meeting the requirement. But officials are concerned they are not meeting the will of the people.
“Our current system … is not meeting the demands of the voters,” said Mayor Pro Tem Kevin McKeown. “I think we must revisit our affordable housing policies and make some drastic changes.”
“I think we must revisit our affordable housing policies and make some drastic changes.”
System can’t pay for itself
When Santa Monica voters in 1990 passed Prop R, which set the affordable housing mandate locally at 30 percent, the City Council enacted legislation two years later requiring developers of new multi-family complexes to include affordable housing in their developments.
But the ordinance was legally challenged because it reportedly made building multi-family housing in the city so unprofitable that it deterred developers from doing projects in Santa Monica, officials say.
After settling the lawsuit, the council in 1998 enacted new legislation requiring developers to either pay the city a fee of $15,000 for every unit constructed, build the units some place else in the city, or include them in the development.
“The idea was to give (developers) maximum flexibility,” said Tad Read, a city housing analyst. “In terms of the benefit and accomplishing the goals of Prop R, the best option would be to build the units on the site and not pay the fee.”
But to the consternation of city officials, the majority of market-rate developers have chosen to pay the fee.
Between July 2001 and June 2002, the city collected $637,743 in affordable housing fees from 13 market-rate projects. During the same time, developers of four apartment complexes chose to include the affordable housing in their projects or build the units elsewhere in the city.
The money from developer fees is loaned out for housing projects, which typically combine the city’s funds with federal, state and charity to come up with enough to build the affordable units.
Officials have realized the fees can’t pay for the number of affordable housing units required. As a result, it has created a disparity between the number of market-rate apartments and affordable housing being built in the city. City officials say it costs about $150,000 for each affordable housing unit, which is not enough.
For example, a 10-unit apartment or condominium project — the average size of a complex in Santa Monica — should result in three units of affordable housing. But if a developer pays the fee of $15,000 per unit, it nets the city $150,000 — enough to build one unit of affordable housing.
“I think we must revisit out affordable housing policies and make some drastic changes.” — Pro Tem Kevin McKeown. — KEVIN McKEOWN Santa Monica Mayor Pro Tem
“The fee must be set low enough not to frustrate market-rate housing production,” said Joan Ling, executive director of Community Corp. of Santa Monica, the city’s largest affordable housing developer. “As a result it pays for only a minuscule cost of producing an actual unit of affordable housing.”
Few solutions on horizon
The only reason the city was able to come close to meeting the 30 percent obligation for the past four years is because there were many large affordable housing projects already planned before the changes were made, Ling said.
But it’s not a simple solution to raise the developer fee, some city officials say. Even if the city hired a firm to conduct a very costly and technical study on how much it could raise its fees, the amount would be far below what’s needed to keep up with the voter mandate in Prop R.
Even if the City Council voted to increase the amount, it would likely spark another costly lawsuit that would ultimately result in the fee being lowered, officials said.
“There’s not an easy answer,” Read said.
Compounding the problem is that affordable housing developers — and other developers included — are getting bound in Santa Monica’s notorious red tape when it comes to getting a project approved at City Hall.
While there is little the city can do immediately to raise its fees, the City Council can act quickly to change the city’s policies, officials say.
Last month it enacted a law that exempts affordable housing projects with less than 50 units from going through a public review.
Instead of having to clear a Planning Commission known for its well-known knit-picking of potential impacts from development projects, the affordable housing projects only have to go through the Architectural Review Board, which is a public body limited to looking at design characteristics.
And the projects are exempted from having to complete a time consuming and costly environmental impact report, which studies everything from pollution to traffic and parking impacts of developments.
The exemptions will make building small affordable housing projects — which typically take three years to complete in Santa Monica — less expensive and make them available quicker, officials said.
“We have projects coming in the door already because of the exemption,” Read said. “We are already lending and helping new projects get off the ground, and we’re looking at other projects in commercial areas, such as Broadway and Santa Monica Boulevard that would be sizable projects and could take advantage of the new exemptions the Council enacted.”
Even so, Read acknowledges the exemption comes much too late to make a difference next year, and it will not likely raise the production of affordable housing production to the levels required.
“When we look ahead to future years,” he said, “we see there’s not going to be a lot of meeting the Prop R requirements.”
Another option considered by city officials is changing the language in Prop R to allow the city to count older complexes it buys and redevelops into affordable housing. Under current law, only the construction of new units can be counted.
3A7,“When you have acquisition, you are buying them, fixing them up and restricting the deed long-term,” Read said. “It’s much cheaper than building new units and there’s no real approval process to go through.”
But Ling counters that when Community Corp. redevelops older complexes for affordable housing, they don’t become available for many years because the current tenants in the building must be allowed to stay as long as they want. Tenants can’t be forced out and have the right to renew their leases.
And because the greatest need for affordable housing in Santa Monica is for families, who need two-and three-bedroom apartments, buying older complexes which typically have one-and two bedroom-apartments is not practical.
“We won’t be able to buy housing appropriate for what the need is,” Ling said. “And if we try to combine units to make them into two-or three-bedroom units, it’s more expensive than building a new one.”
Ling and other affordable housing advocates believe the city is doing everything it can to encourage affordable housing. But because land is scarce and extremely expensive, as well as officials being limited with legal restrictions, meeting Prop R requirements is going to be very tough in Santa Monica.
“What the city does is that it struggles and I don’t believe there are any easy answers and what it’s doing is trying to protect people and especially low-income people already living here and promoting housing that has a range of affordability,” Ling said. “If they don’t do it, no one will be able to live here unless they make $200,000 a year and I don’t believe that’s the kind of community any of us want to see, including those who make $200,000 a year.”
Originally published in the Santa Monica Daily Press print edition on December 17, 2002. Read the original PDF.