Council expected to OK new fees for developers
CITY HALL — Elected officials today will decide whether they will quadruple some developer fees in an effort to provide more affordable housing in Santa Monica.
The proposal is set to be reconsidered by a full City Council after a July meeting in which the six members present couldn’t come to a consensus on what the economic impact might be for significantly raising developer “in lieu” fees. As a result, there was neither a financial analysis of the impact to developers, as requested by some councilmembers, nor an immediate decision to raise the fees, as desired by others.
Those supporting further financial analysis included Councilmen Bob Holbrook, Herb Katz and Bobby Shriver. Those hoping to put the new fee structure in place immediately included Councilmen Richard Bloom and Ken Genser, and Mayor Pam O’Connor. Councilman Kevin McKeown wasn’t present at the July meeting.
He has indicated, however, that he will likely support the fee increases because he feels it will be a common sense approach to bolster affordable housing.
“Further delays on this mean less affordable housing for families who need it, and bigger short-term profits for market-rate developers,” McKeown said. “These fees should have been adjusted sooner, not later."
The council’s consideration comes after a May presentation that indicated City Hall hasn’t kept promises made to voters that it would be consistent in the number of affordable housing units it produced over the past 10 years.
While Santa Monica, overall, has produced 2,208 units of affordable housing in the last seven and a half years — exceeding the region by 126 percent — City Hall has failed to be consistent in production, as promised to voters in Proposition R, according to information provided by Hamilton, Rabinovitz and Alschuler, the firm hired to help Santa Monica manage its affordable housing portfolio.
Proposition R — a measure approved in 1998 by Santa Monica voters requiring 30 percent of housing units constructed in the city each year to be affordable — has been met or exceeded five out of the last 10 years, according to HR&A. However, that rate of production has been declining steadily in the past few years, prompting elected officials to take action.
The City Council agreed in May that city staff should draft a resolution which would increase the in-lieu fee for apartment developments from $6.14 per square foot, a rate established in 1998, to $26.08 per square foot citywide, an increase of 300 percent. Condominium development fees, which were $11.01 per square foot in 2000, would be doubled to $22.33 per square foot citywide.
Jim Kemper, acting housing administrator at City Hall, said developer “in lieu” fees comprised approximately $500,000 of the $12 million that went toward the affordable housing fund in Santa Monica last year. The vast majority of the affordable housing fund — $9.2 million — came from re-development taxes accrued and distributed throughout Los Angeles County, which City Hall has no direct control of, Kemper said.
Kemper said it was difficult to speculate what effect increases to in-lieu fees might have on development in Santa Monica and the affordable housing fund since the two factors are inter-related. He said the fees could contribute significantly to the affordable housing fund if development continues at the same pace or increases, but he said an adverse effect of slowing development also was a possible result.
Allen Freeman, a developer with JSM Construction, Inc., a local development company, has previously said the increases would likely not affect his firm, since it already takes the general approach of building affordable housing off site as opposed to paying the “in-lieu” fees.
However, Freeman noted other developers, who typically pay the “in-lieu” fees, may not be pleased with City Hall’s approach.
Meanwhile, some residents are concerned the fees would put a significant burden on their ability to re-develop their own property. Mark Shepherd, a screenwriter who first moved into his Santa Monica home as a renter, said he would like to tear down his house — wedged between two commercial buildings — and create a five-unit condominium complex.
Shepherd said the proposed fees would require he pay $40,000 for affordable housing for each unit he builds, a total of $200,000. Shepherd, who said he voted in favor of Proposition R, nonetheless believes the new fees would go too far to burden him and other property owners trying to make better use of their land.
“I’m not a big developer and these proposed fees are just killing me,” Shepherd said. “I think there needs to be better justification for increasing the fees, especially since we’re exceeding our affordable housing goals overall.
“Santa Monica residents want to use their property, and these fees are going to make it hard for them to do so.”
Councilman Herb Katz said he’s concerned that a lack of financial analysis could mean the fee increases may have a disastrous effect on the local market.
“The fee increases are unconscionable,” Katz said. “We have no idea how this will play out economically and staff has done nothing to find out.”
However, some councilmembers feel there is too much concern about the economic impact of the fees.
“I think these fees are justifiable and appropriate,” Genser said. “If it has the consequence of deterring market rate development, that’s something, frankly, I think most residents wouldn’t mind.
“The amendment will help us get more affordable housing.”
Originally published in the Santa Monica Daily Press print edition on October 11, 2005. Read the original PDF.