Housing is Complicated: Post #1

This is my latest post of The Healthy City Local:

I attended a fascinating meeting of the Housing Commission Thursday afternoon. The only item on the agenda was the question, which the City Council will likely take up this summer, whether the City should readjust the parameters for production of affordable housing. These parameters include the limits on income that households can make to qualify for affordable housing, and the amount of rents that affordable housing providers can charge. (The commission heard from a panel of experts, asked a lot of good questions, asked staff to come back with more information, and postponed making their recommendations until their meeting in May.)

Anyone who has paid attention to City Council hearings lately, on matters such as the Village Trailer Park, or what developments should receive expedited planning review, has heard a lot about the different categories of affordable housing. These include extremely low, very low, low, and moderate. These terms all have definitions, but those definitions vary depending upon various factors, such as where the financing comes from to build the housing or what governmental entity is making the rules and for what purpose.

Santa Monica has a definition of its own, which it uses for one purpose. (It uses other definitions for other purposes, too.) This definition was included in Proposition R, which the voters passed in 1990, and which requires that 30% of all multifamily housing built in Santa Monica be affordable to “low and moderate income households.” Prop. R defines those terms with reference to the Los Angeles County median income as determined by the federal Department of Housing and Urban Development: “low income” under Prop. R means a household with income not exceeding 60% of the county median, and “moderate income” means a household with an income not exceeding 100% of it. Under Prop. R at least half of the 30% (i.e., at least 15% of all housing production) must be affordable to and occupied by low-income households.

Santa Monicans support the building of affordable housing – in 1999 voters here passed an authorization for the City to build more of it, an authorization that is generally difficult to get passed, and in opinion surveys the cost of housing regularly appears as one of the primary concerns of residents.

One of the many interesting aspects of Prop. R is that while its stated purpose is to make sure that Santa Monica as it evolves maintains its historic economic diversity, with housing affordable to both low and middle-income families, Prop. R also has the potential to limit all housing development. Under Prop. R the amount of market-rate housing development is limited by the amount of affordable housing: the number of market-rate units built under the “70%” is limited by the number of affordable units built under the “30%.” For instance, if only 60 affordable units are built, only 140 market-rate units can be built.

At the same time, the City has always relied on market-rate housing developers to provide at least some of the affordable 30% — particularly moderate income housing that can be financed from private markets without subsidy. With the end of redevelopment, which provided much of the funding for low-income housing, the City will be looking even more to market-rate developers to provide affordable housing by “subsidizing” it with profits from market-rate rents. (The City is also now going to seek housing funds from commercial development.) The equation works the other way, too – if you want a big number of units in the 30%, you need a big number in the 70%.

It should be no surprise then that the politics of affordable housing have always been entangled with the politics of development. Affordable housing advocates, including non-profit providers that have had to deal with anti-development groups the same as for-profit developers do, have often made common cause with the latter to fight restrictive zoning policies. Meanwhile, the largest for-profit developers of housing in Santa Monica have typically built affordable housing to satisfy their affordable housing obligations rather than pay an in-lieu fee because they know that if the 30% figure is low, they ultimately will not be able to build as much market-rate housing.

On the other side of the political equation, anti-development interests have used affordable housing requirements as a means of making development less financially feasible and otherwise more difficult.

Personally, this attention to affordable housing has given me an opportunity to learn about the effects of different parameters on how and what affordable housing gets developed, and about how affordable housing can be financed in the post-redevelopment world. In posts over the next couple of weeks I expect to share what I learn and my thinking on the subject.

Thanks for reading.