Amid the 15 bills Governor Jerry Brown signed last week to address California’s bubbling housing crisis, there was no shortage of “sticks” for developers to use to beat recalcitrant local governments into submission should they not approve proposed housing projects. But lurking quietly among these noisier bills is a “carrot” — Assembly Bill 1505 — that authorizes cities and other local governments to impose affordability requirements on rental developments as a condition of approval.
Such requirements had been boilerplate until 2009, when an appeals court ruled they violated the state law governing rent control ordinances. With the passage of AB 1505, such requirements were once again rendered legal. “It’s a huge deal,” said David Rowell, a housing project manager with the City of Santa Barbara. It might make an exceptionally big deal, he added, for the city’s controversial AUD (Average Unit-Size Density) program, which rewards developers willing to build rental housing with increased densities and relaxed parking requirements.
Under the new state law, local governments can require landlords to set aside up to 15 percent of the new rental units for low- to moderate-income households. Anything more than 15 percent requires permission from the California Department of Housing and Community Development. If only 10 percent of all 1,300 proposed rental units now wending their way through the city’s review process were set aside for low- to moderate-income households, that would be 130 new affordable units. “That’s 130 households paying reasonable rents,” Rowell stated, “and the city isn’t paying any subsidy.”
The first AUD project out of the gate was the 89-unit complex on upper State Street known as The Marc, much reviled by critics not just for its density but for its high rents. Two-bedroom apartments there rent for as high as $3,500. Critics of the AUD program have seized upon The Marc’s high prices to discredit the experimental housing initiative as a whole. Had AB 1505 been in place when The Marc was approved, City Hall, Rowell pointed out, would have had the ability to soften those costs for some. Under AB 1505, a two-bedroom apartment could be rented to a moderate-income household for no more than $1,700 a month and to a low-income household for no more than $1,350.
Even with AB 1505, it’s not quite that simple. Right now, Rowell is overseeing two economic studies to determine how much of an “inclusionary” burden AUD developers can absorb without destroying the economic incentive the AUD program creates. City Hall has also contracted for an economic study to determine how many new low- and moderate-income jobs are generated by new rental housing developments to service the tenants who will live there. The results of these two studies should be out sometime in November.
The extent to which AB 1505 can be applied to other proposals in the AUD pipeline will be a council call. The further along any project is, the harder it will be for the council to change the rules. According to Rowell, there are currently 456 AUD rental units that have been permitted or deemed complete. These, he said, could be looking to have building permits issued within the next week. Another 124 units’ worth of AUD rental housing units could be seeking permits within the year.