Convenient Fictions and Unintended Consequences

By Frank J. Gruber

However you look at it, the Anita Anderson Initiative, Prop. 90 on November's ballot, is a bad piece of work. Purportedly written to address eminent domain abuses that will allegedly be unleashed on property owners after the Supreme Court's Kelo decision, the initiative in fact is an attempt to strip the regulatory powers governments, particularly local governments, have over real property.

The law, if passed, would call any regulation that diminished development rights a "taking" and thus require compensation. This would severely crimp the style of local governments used to revising development standards at will.

The Santa Monica City Council reacted in typical fashion to the possibility that Prop. 90 might pass; it reached for the ordinance book. The Council instructed staff to devise revisions to the zoning law to thwart Prop. 90 from preventing any down-zoning the City might want to do after completion of the update to the Land Use Element of the City's General Plan -- a process that is now expected to take two more years.

In response, staff came up with the convenient fiction that even though the Land Use Element update is only at the midpoint, because certain "key concepts have been clearly and repeatedly articulated . . . there is no further need to deter implementation."

When I say that this is a fiction, I don't mean that it is completely false. I believe most Santa Monicans agree that there is no great need to attract more jobs to Santa Monica, that there is no cause to make big changes to our existing residential districts, and that future growth should be measured rather than convulsive.

The conveniently fictional aspect is that a consensus over generalities, to the extent one exists, justifies "implementation" by means of detailed changes to the City's zoning before the process has been completed; especially changes at a level of detail never discussed in the LUCE process and sometimes dealing with districts that received minimal attention in the process.

Nonetheless, as much as it's a bad idea to take panicked, politically motivated actions in response to whatever is the new scare (not the least because any action Santa Monica might take could give the Prop. 90 proponents good material for their campaign commercials), there are some good suggestions contained in the proposals of staff that the Planning Commission reviewed and revised last week. (see story)

First, some history. For 20 years, two forces have propelled anti-development politics in Santa Monica. One force is a conservative, raise the drawbridge, fed-up-with-traffic, I've got mine, faux-environmentalist no-growthism. The other has a stronger claim to being progressive -- using down-zoning as a strategy to protect affordable (rent-controlled) rental housing.

In response to these political forces, for two decades on a near constant basis the City has been evaluating, reducing and refining development standards in the multi-family districts. (This history is summarized on page five of the staff report for last week's Planning Commission; see Item 11-B.)

These efforts haven't satisfied anyone.

The conservative no-growthers are never satisfied no matter how many impediments the City enacts to development. They feel, as Lorraine Sanchez, a member of the Board of Friends of Sunset Park, told the Planning Commission last week, "helpless and hopeless" in the face of the City's alleged pro-development agenda.

Ms. Sanchez also told the Commission that Santa Monica's "residents" -- apparently all of them -- don't care if their children won't be able to afford to live here, that it would be better to preserve the place as is for the rich people who could, and, just to show how delusional the fear of change can make people, she told the Commission that if policies don't change, Santa Monica will have a population of 200,000 in ten years. (Santa Monica has had a stable population of about 85,000 for 40 years.)

As for the progressives' 20 years of trying to protect rent-controlled apartments, the rate of condo conversions appears to be higher than ever. The law of unintended consequences has been wildly effective.

When the City down-zones it doesn't stop development but mrerely creates, in a rising market, an incentive to build fewer, bigger and more profitable condos. Throw in the effect of the Ellis Act, which for all practical purposes mandates condo development (instead of new rental apartments) when a developer tears down apartments, and the supply of rental housing in residential districts -- the kind of housing more than 70% of Santa Monicans have lived in for many decades -- has decreased.

The current changes planning staff has suggested to thwart the Anderson Initiative may have the same effect. In the multi-family zones the basic change is to reduce the maximum number of condos allowed on a standard lot from five to four. This reduction is only on paper, though, because in combination with the City's new requirement that one of four units be dedicated affordable, if developers build four units, including an affordable one, then state-mandated density bonuses would entitle them to build six units in total.

But the risk remains, from a progressive, affordable housing standpoint, that a developer might choose to avoid the affordable unit hassle and build just three big, highly profitable condos. (I wonder -- if such a development replaced four or five apartments, would the no-growthers be happy? If the City banned apartments and condos altogether, would developers find it profitable to tear down apartments and build single-family houses?)

So what's there to like about these latest proposed tweaks?

What I like -- and it may be slim pickings -- is that staff proposes to distinguish between condominium developments and rental apartments and address the loss of rental units problem directly. The reductions in development rights that staff proposes would not apply to various "preferred" projects, and the definition of preferred includes rentals.

For developments where the Ellis Act doesn't apply, this would provide a significant incentive to build rental apartments. That's important, because rental apartments, even if initial rents seem high, are an important source of housing that is affordable to both low and middle income households.

One reason is that if new apartments continue to be built, there is less upward pressure on the rents for existing apartments. Another reason is that apartments provide housing for middle-class households that don't have enough assets to put a down payment on a house or condo. Finally, rents may increase over time, but they are not subject to the same speculative pressures that have made home-ownership impossible for even middle-class households.

So, it's good that staff has proposed incentives for apartments. It's bad that they are necessary.

Staff proposed and the Planning Commission reviewed, revised, and passed on to the City Council other zoning changes that I'll review when the Council takes them up -- between now and November.