House Poor

By Frank Gruber

I have no idea what advice City Attorney Marsha Moutrie gave the City Council at last week's closed session regarding possible legal challenges to Santa Monicans for Renters' Rights plan to require developers to build affordable units, a plan the Council adopted conceptually May 17, but I'm thinking that last week's column about the plan was too negative.

It's not that this week I consider SMRR's plan any less simplistic and counterproductive than I said it was, but I didn't make it clear that neither I nor anyone else have any solutions to the affordable housing crisis.

Maybe I should have been less negative about SMRR's plan by being even more negative about the whole situation.

Providing quality housing for the entire population has been a key social and governmental concern since the first tenements were built and decried in the 19th century, not only in this country but also in all other industrialized nations. No one has figured it out, and often the best-intentioned plans, such as slum clearance and urban renewal, or, for that matter, suburban sprawl, have had the worst results.

What we do know is that it takes subsidy to build housing, not only for the poor, but also for the working and middle classes. Subsidy can take the form of Section 8 vouchers and public housing in the cities, or mortgage deductions and new infrastructure in the suburbs.

Housing, like freeways or rapid transit systems, is expensive. Including land costs, an affordable apartment in Santa Monica now costs about $365,000 to build.

I am not going to kid anyone that I have any big ideas. But in Santa Monica, at least, the problem with so many solutions, from Prop. R to the latest proposal from SMRR, has been that they focus on the percentage of units that will be affordable, when the important issues are how many units we need, not only to keep our little city vital and diverse, but also to satisfy our regional responsibilities, and how many we can reasonably build.

Santa Monica has almost 50,000 units of housing, many of which are old and not well built. Our population of about 85,000 has not changed in 40 years even while, since 1980, the region's population increased from twelve to eighteen million, and the number of jobs in Santa Monica increased by 21,000.

Santa Monica's population has remained the same even though since 1980 we have gained almost 3,000 units of housing. But as nests empty, and dwellings have fewer bedrooms, the average number of people in each housing unit has declined from 1.90 in 1980 to, according to the City's estimates, 1.75 in 2004.

A difference of 0.15 might not seem like much, but if you multiply it by 49,297 units (the number in 2004) you get 7,395 missing residents -- almost ten percent of our population. We have to increase our housing stock merely to retain the same population.

The boom in jobs in Santa Monica and on the Westside, with little housing growth, has created huge pressures on housing and land prices. Prices in Santa Monica are among the highest in the country per square foot (although, in fairness, housing prices are way up throughout California). Santa Monica is losing its historical blue-collar population.

The public opinion survey the City conducted for the updates to the land use and circulation elements of the general plan showed that Santa Monicans want a vibrant and diverse community. The only way Santa Monica can maintain its diversity is to build more housing.

Fortunately, according to the survey, a large majority of residents favor modest to sizable growth in housing (55 percent modest, 14 percent sizable, 69 percent total pro-growth), at least in areas where there currently is not much housing. (The survey didn't ask about growth in existing residential neighborhoods, but only 24 percent said they wanted no new growth in housing.)

The question the survey begs is what mostly "modest" with a touch of "sizable" growth would mean in real world Santa Monica? And would this level of growth (let's call it "moderate") reasonably help solve our housing problem?

What if we peg moderate growth at one percent per year -- about 500 units? One percent sounds moderate to me, and since the average number of new units built annually since the city's current mini-boom began in 2000 is about 400, 500 is a plausible goal.

What about affordability? Overall affordability, for all income groups, is a complicated question, but in Santa Monica, affordability means Prop. R, which would require that 30 percent, or 150, of 500 new units each year be affordable to low or moderate income households. (On a side note, the new SMRR proposal would effectively knock the moderate category out of Prop. R, by requiring all developer-built units to be affordable to households earning less than, in different circumstances, 60 percent or 80 percent of county median income.)

Although Prop. R itself ignores important segments of the population currently priced out of Santa Monica (such as middle-income households up to 120 percent of median income), Prop. R, when combined with one percent annual growth, at least provides a realistic goal for housing policy; i.e., let's create a housing program that will get those 150 affordable units built.

To start with, and to extend an olive branch toward SMRR, it's not unreasonable to expect that, with appropriate incentives, half of the 150 units could come from the private development sector, or in private-public partnerships. After all, one developer, Craig Jones, has built 234 of the 771 affordable units built in the city since 1995, and 25 percent of the 350 apartments built at the Arboretum were affordable by agreement with the City.

Large-scale developers have the wherewithal and organizational strengths to provide a full spectrum of affordability, provided there is financial feasibility. In the near future, for example, private developers in partnership with the City's redevelopment agency will be building 160 affordable units at the Civic Center. If Santa Monica Place (another redevelopment zone) is rebuilt, affordable units will be included, in numbers to be negotiated, among the 450 units planned there.

It is not entirely unfair to hit developers with some of the cost of affordable housing, given the subsidies given to homebuyers and builders, including depreciation deductions, and in an overheated market where landowners are making speculative profits. But, vis-a-vis the SMRR plan, it is wrong to single out developers and expect them to shoulder the burden alone, or nearly alone, and it's counterproductive to adopt a financially infeasible one-size fits all plan or to hit small, infill developments, when wealthy single-family homebuyers pay nothing, receive the biggest subsidies, and collectively take up the most land.

It would be better to encourage small developers to partner up with, or pay in lieu fees to, non-profits that are dedicated to building and operating affordable apartments.

Which brings us to the other half of the affordable equation, the other 75 units. We hear a lot about Prop. R, but little about Prop. I, the 1998 initiative that authorized the City to build or acquire (i.e., rehab) affordable housing -- up to about 250 units a year. The City works through non-profit developers like Community Corporation to buy or acquire units, but in the past five years the City has built pathetically few units and has never approached building or acquiring the annual authorization.

With carryover authority, at the end of fiscal year 2004, the City was authorized to build or acquire 855 units.

There are many obstacles to building housing, particularly the scarcity of good sites. I will analyze the obstacles as well as the City's resources in a future column. But if the City could build even a third of its annual authorized units, and if the City encourages and incentivizes private developers to continue to build what they have been building, then there will be no Prop. R problem.

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I have previously suggested that all Santa Monicans need to read Paula Scott's recently published history of Santa Monica, Santa Monica: A History on the Edge. Now I want to plug a talk Ms. Scott will be giving at Borders on the Promenade June 7 at 7:30.

The topic will be Santa Monica's independence and what it has meant for the city, with a focus on the push to annex Santa Monica to Los Angeles in the 1920s. What with all the focus today on regional issues, the topic sounds timely.