Affordable Housing for People or for Cars?

By Frank Gruber

Two weeks ago I wrote about how the City Council was taking a look at the City's program for encouraging production of affordable housing. Based on the staff report, and prior hearings at the Planning and Housing Commissions, I expected the issues would be how much to increase the fee apartment and condominium developers have to pay "in lieu" of building affordable housing on site, as well as other incentives the City might enact to facilitate affordable housing construction.

Instead, at the City Council meeting of May 10, Santa Monicans for Renters Rights (SMRR), represented by Dennis Zane and Michael Tarbet, presented a proposal to return the City to a system where nearly all developers would be required to build affordable units. (In this column, "affordable" refers to a unit deed-restricted to low or moderate income households.)

SMRR proposed to require developers of multi-family projects as small as four units to do one of the following: (i) make 20 percent of their units on site (25 percent for developments of sixteen or more units) affordable as rentals to low-income households; (ii) build twice as many such units off-site, but within a quarter mile; or (iii) build a development that was 100 percent affordable to households with no more than 80 percent of the L.A. County median income.

Because of the late hour of the public hearing May 10, the Council postponed deliberations on the housing issue to last week's meeting. The Council enacted higher in lieu fees, and then, ignoring a list of other ideas staff had to encourage affordable housing production, Council member Kevin McKeown moved that the Council adopt the SMRR proposal. With minor changes, his motion passed, receiving the votes of the four Council members elected with SMRR support (i.e., McKeown plus Ken Genser, Richard Bloom and Pam O'Connor).

Council members Herb Katz and Robert Holbrook were not present. Council member Bobby Shriver voted against the motion for the sensible reason that it was far too detailed and far-reaching for him to vote for it without having had the benefit of public discussion and staff analysis -- in particular, an economic analysis of whether the proposal would in fact cause more affordable housing to be built or instead constrain it.

Requiring all developers of housing to provide affordable housing is a bad idea whose time in Santa Monica came and went but is back again.

We do need to accelerate production of affordable housing. In recent years the numbers have not been good. From a high of 211 units out of 702 total units in fiscal year 2002 alone, the past three years (including estimates for FY 2005) have seen construction of only 73 affordable units out of 939 total units.

While these numbers create problems under the City's Prop. R, which requires 30 percent of newly constructed housing to be affordable, from a social point of view, the more serious problem is the absolute drop in the number of affordable units.

In FY 2004, for instance, out of 235 total units, only 40 were affordable. While Prop. R would have been satisfied if, say, only 100 total units had been constructed, the overall need for housing in a fungible market (and in the context of a regional housing crisis) would have been shorted 135 units.

So the trick is to satisfy Prop. R's 30 percent requirement without reducing overall housing production.

Before giving my reasons for opposing the SMRR proposal, I also want to agree with SMRR that it is important to make sure affordable housing is built amid market-rate housing. When it comes to big developments, of more than, say, 150 units, which create their own micro-neighborhoods and which typically require discretionary approvals, it is reasonable for the City to require, through negotiation, inclusion of affordable units.

(This concept also works the other way: just as it's important to include affordable with market-rate, it's important to include market-rate units in large affordable developments, as the City plans to do with the Civic Center housing.)

But trying to solve the housing crisis or satisfy Prop. R by requiring developers of small projects to build units on-site is the wrong solution for many reasons. For instance:

Private developers are not in the business of providing affordable housing, don't want to provide affordable housing, and there is no reason to believe they are good at it. The money they lose on affordable units is a serious impediment to building in-fill market-rate housing, which is important not only for increasing supply but also for revitalizing neighborhoods.

It has always puzzled me that SMRR extols "small is beautiful" when it comes to local businesses, but not when it comes to small-time developers and property owners -- Council member McKeown's "money-meisters from around the globe."

Nor is it fair to tax housing to build housing. It's also counter-productive. SMRR's proposal would shift nearly the entire burden of providing affordable housing to one sector of the economy: new apartments and condominiums.

Under the SMRR proposal, for instance, a developer could tear down an apartment building and build a single-family house, and have no obligations to provide affordable housing. (Readers may recall that a few months ago a single-family house is exactly what SMRR stalwart and Planning Commissioner Julie Lopez Dad preferred to see built, instead of twelve condominiums on a Virginia Avenue site.)

One can also detect ulterior motives of the no-growth sort: Council member Genser, in remarks during last week's hearing, opined that if the new law deterred building more housing, most people in the community would not be upset. And Mr. Zane is leading SMRR's fight against building 450 units of housing, including affordable units, at Santa Monica Place.

Nor is it possible to separate SMRR's ostensible interest in building affordable housing from its long battle against condo developers whom SMRR blames for evicting tenants and destroying rent-controlled apartments. The SMRR proposal would require condo developers to be landlords.

I am sure SMRR wants to protect existing tenants, but the small boom in housing the City has experienced in recent years has consumed only a few apartments. According to the reports City staff makes to the City Council each year under Prop. I, which the voters passed in 1998 and which authorizes the City to build or acquire affordable housing (up to one-half of one percent of the city's housing stock each year), in fiscal years 2002 through 2004, only 148 housing units, out of about 50,000, were demolished, and, based on other data, it appears that at least half of these units were single-family homes replaced by other single-family homes.

What these Prop. I reports show is that it's the SMRR-run City itself that has failed to build affordable housing. At the end of FY 2004, the City had an unmet authorized capability -- authorized by the people -- to build 855 units of affordable housing (a number that didn't include authorizations more than three years old that had lapsed because of the City's inaction).

Oh, you say, the City doesn't have the money. Not true -- the City can mine a mountain of redevelopment money. But although the City Council convened a task force to decide how to spend redevelopment money (nearly 100 million dollars of it) for downtown parking, there has been no similar attention to affordable housing, notwithstanding Prop I.

I won't go into the legal challenges the SMRR proposal is bound to face, and which the City Council will discuss in closed session with the City Attorney tomorrow night, but if SMRR and the City Council are serious about housing people, it's time they examined their own priorities.