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Yahoo!Making advances in Santa Barbara’s affordable housing program, councilmembers Dale Francisco, Das Williams, and Grant House met on April 1 as the Ordinance Committee and recommended some basic changes to the city’s inclusionary housing law. Conceived in 2004, the ordinance demands that all ownership subdivisions of 10 units or more make 15 percent of those units affordable to “middle-income” families, which means two-bedroom condos priced at $249,000, and three-bedrooms at $283,000. This is supposed to allow employers to attract and keep a workforce without increasing commuter traffic and without relying on federal and state subsidies which in any case are currently unavailable.
However, many feel that because the ordinance does not affect housing projects of fewer than 10 units, it is practically useless in meeting the demand for affordable middle-income housing. Planning staff recommended that an inclusionary requirement apply even to developments with as few as two units.
Developers of condo projects with two to nine units who do not want to include affordable units could pay an “in-lieu” fee of $17,700 for each unit they build, so a two-unit project would pay $35,400 and a nine-unit project would pay $153,000. This is a lighter burden than the $473,300 fee that currently applies to larger projects, for each affordable unit they are required to build but do not. The fees would then be used for a wider range of projects than currently allotted, including subsidizing upper-middle income housing for local employees. Still, many community members opposed the changes, citing the burden to small-scale developers and the struggling economy. Councilmember Francisco voiced his opposition to the $17,700 in-lieu fee. “I don’t support lowering the threshold to two units [and] I don’t agree with inclusionary housing,” said Francisco.
Williams defended inclusionary housing and in-lieu fees, supporting the changes staff had outlined. “This is a regional market. Charges recommended today will make it more functional,” said Williams. “Is it okay to allow smaller units [like condominium developers] to sail on through without an extraction?”
Despite his objection to inclusionary housing, Francisco said he would support a compromise in which only projects with between four and nine units would have pay the $17 grand in-lieu fee. “The issue here [is] for those mom’n’pops that run things on a shoe-string,” said Francisco.
House reminded those present that the ordinance was not meant “to be the keystone to the whole affordable housing program,” but that it does and should “help us meet a need not being fulfilled by market.”
After hearing passionate arguments for and against each of the proposed changes, the committee's majority voted to recommend a $17,000 in-lieu fee on developers of two to nine units, with Francisco dissenting. The money would be used to buy back units in default, subsidize middle-income and upper-middle income housing for local employees, and pay for staff costs in administrating the inclusionary program. Upper-middle income units in sponsored projects would be exempt. Projects of two, three, or four units would have the in-lieu fee delayed until the units are occupied. For the recommended ordinance to become law, a supermajority of five councilmembers will have to agree.
Williams said the decisions would help propagate the development of affordable housing. “[These are the] first meaningful steps towards [making sure] that the city of Santa Barbara will build housing for the income levels Santa Barbara City needs,” said Williams. House agreed, stating, however, that much still must be done. “Inclusionary [housing] deals with a little tiny piece of the workforce housing discussion,” said House. “This is not intended to be the be all and end all.”
This story has been revised to correct an error caught by alert reader David Pritchett.
Double-clicking on any word or phrase in this story will open a reference window with definitions and links to other reference material.
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I saw much of this deliberation and indeed it is an accurate article that captures the substance. Especially good to illuminate is the remark by Councilmember Das Williams that rebuts the claim that various fees and extractions imposed onto housing projects somehow get "passed along" to the home buyers.
Of course, the whole thang about "Market Rate" housing is that it is, literally, in a sales market, where the price of housing is based upon the latest local price for what buyers are willing to pay and not on what sellers think then have to charge to compensate for fees and extractions.
For example, if a condo costs $500K to build and can sell on the market for $700K, then the builder et al. gain a return of $200K per condo. If that same condo has an affordable housing in-lieu fee of $17K added on that the builder-developer-applicant must pay, the market rate for that condo is still $700K, but the investment return thus becomes $200K minus $17K.
That nasty law of economics about how the market clears is why all the builders-developers-applicants go bizerk and start crying "it does not pencil out" because they are taking a hit on that $17K they otherwise could keep. In this hypothetical example, if they need or want a return of at least $200K per condo but will not accept a return of $183K, then that literally is their own business decision.
However, the spin that a fee into the City affordable housing pot of funds somehow will be passed along to the condo buyers is just well-paid crocodile tears.
NOTE TO COPY-EDITOR AND AUTHOR:
This was an Ordinance Committee meeting of 3 of the 7 members of the full City Council. Thus, the vote was a majority of the 3-member Ordinance Committee, not the "council majority" of all 7 as written in the article.
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David_Pritchett (David Pritchett)
April 4, 2008 at 12:16 p.m. (Suggest removal)
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