San Diego City Council Drastically Reduces ADU Fees

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The San Diego City Council voted unanimously on April 30 to drastically reduce permitting fees in the city for both accessory dwelling units (ADUs) and junior accessory dwelling units (JADUs).  LDC Senior Associate Artemis Spyridonidis attended the meeting to share the firm’s research findings and support the reduction in fees. LDC’s research on fees and production rates throughout California demonstrates a positive correlation between low permit fees and higher production of ADUs.

Councilmember Scott Sherman lauded the reduction in fees: “It’s so hard in San Diego to find a place you can afford when you’re first starting out…This is a great first step. It’s not going to solve the problem overnight, but it’s going to make it a lot easier for people to afford to be able to build these, providing housing stock.”

Councilmember Georgette Gomez celebrated the Council’s vote: “This will have a positive outcome at the end of the day…we’re going to see more of these permits being requested to develop these units that are going to be naturally affordable, that are going to help more San Diegans with a bit of income but also to make housing affordable…”

The vote, which included both fee reductions and waivers, will help the city achieve the goal it adopted in March 2018 to build 6,000 ADUs in the next 10 years. Table 1 below compares the previous costs associated of permitting ADUs with the new cost structure approved by City Council on April 30:

Table 1. REDUCED/WAIVED FEES[1] 

Fee Type Previous ADU Fees

Approved ADUs Fees(as of April 30, 2018)

Water Capacity Fee $1,524 $0
Sewer Capacity Fee $2,062 $0
General Plan Maintenance Fee $275 $0
Developmental Impact Fee $24,000-29,000

$8,000-13,000

Total Fees for Established Communities

$27,861-32,861

$8,000-13,000

Proposed Facilities Benefit Fees*

$44,000-49,000

$8,000-13,000

Total Fees for Newer Communities $76,681-81,681 $16,000-26,000
*Levied only in newer communities

To keep the City’s Development Services Department at full cost recovery, $100,000 will be transferred from the General Fund.

Homeowner Elizabeth DeWitt spoke of the benefit to her family: “The $30,000 it costs now – they told me it might cost me about $50 to build the room – I can’t do that if the fees are $30,000.  We’re in a housing crisis in San Diego. This would help me with my son, and I’m sure it would help a lot of others.”  There were no speakers in opposition.

[1] Additional fees, such as School Fees and SANDAG’s Regional Transportation Congestion Improvement Program Fees, are not included in this table.

Artemis Spyridonidis, Senior Associate, covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about ADUs and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

Requiem for SB 827

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Image of baby grand piano in shadowSB 827 died April 17, 2018, in the Senate’s Transportation and Housing Committee. Authored by Sen. Scott Wiener (D-San Francisco), the bill would have promoted multi-family housing near transit. Supporters claimed it would have been a nail in the coffin of residential racial segregation, forcing housing into neighborhoods that were historically zoned low-density in order to perpetuate the segregation of race and class.

Other similar bills have been successful in the recent past.  The state legislature has already begun to approve bills that have slowly chipped away at the powers of local government to deter the development of housing. SB 1069 (Wieckowski; codified as Cal. Gov. 65582.1), §AB 2299 (Bloom; codified as Cal. Gov. Code §65852.2) and AB 2406 (Thurmond; codified as Cal. Gov. Code §65852.22), which went into effect on January 1, 2017, prohibit local jurisdictions from barring the production of Accessory Dwelling Units (ADUs). On January 1, 2018, both SB 35 and SB 166 became effective.  SB 35 (Wiener; codified as Cal. Gov. Code §65400) penalizes certain jurisdictions that have not met their RHNA assessments by eliminating multiple local planning reviews and creating a streamlined, ministerial approval process for certain infill developments. (See “Bay Area Begins to Feel Effect of SB 35”). SB 166 (Skinner; codified as Cal. Gov. Code §65863), prohibits local governments, in most situations, from permitting a project at a rate lower than the already-established density allows.

Similarly, but certainly with more severe repercussions, SB 827 would have allowed developers to circumvent zoning in transit areas, and build to height, parking, and density levels that exceed zoning limits. The proposed height limit would have been five stories in areas within a half mile of a transit or subway station, and developers would also have benefited from reduced parking and density restrictions. The bill also provided that projects within a half mile of “high-quality” bus lines offering service at 15-minute intervals or more frequently during peak times would benefit from reduced parking and density restrictions, but not the new height limit.

Opponents claimed that it would ruin neighborhoods, devalue homes, allow incongruous development, and unfairly create a strain on infrastructure and transportation. Proponents claimed that the increase in units would drive down rents, giving renters a sigh of relief, and a greater swatch of neighborhoods from which to choose. With the third-lowest homeownership rate in the country after D.C. and New York, California clearly needs more housing. Currently, only 55% of Californians own their home. SB 827 may have been laid to rest, but we undoubtedly need to continue to pursue ways to increase development throughout the state.

Artemis Spyridonidis, Senior Associate, covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about linkage fees and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

Changes to LIHTC and Updates from TCAC

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When President Trump signed the Omnibus Spending Bill into law on March 23, 2018, the Low-Income Housing Tax Credit (LIHTC) Program experienced its first expansion in almost a decade. Last month’s newsletter provided a brief synopsis of the increase in tax credit allocations and the new “Income Averaging” provision. This month provides a more in-depth look at income averaging and relevant regulations changes proposed by the California Tax Credit Allocation Committee (TCAC).

Understanding Income Averaging

The new “Income Averaging” (IA) provision, which was originally introduced as part of the Affordable Housing Credit Improvement Act, creates a third set-aside option that allows affordable housing projects to use imputed income limitations assigned to the units rather than individual household incomes to qualify for tax credits. Specifically, projects need to set aside at least 40% of the units—25% in areas with high housing costs—for individuals with income levels equal to or less than the imputed income limitations assigned to the units.

Federal law also requires that imputed income limitations should not exceed 60% of area median income (AMI) and that rents assigned to the units should not exceed 30% of the imputed rate. However, the IA provision allows units to be rented to households with income levels as high as 80% of AMI if the average overall household income for the units remains at or below 60% of AMI.

Prior to the IA provision, only those units at 60% of AMI or below could receive a tax credit subsidy towards its development costs. As a result, developers and localities can plan a housing community with a greater mix of tenant incomes and still receive the full benefits of the tax credit subsidy, as long as the average AMI target for these units does not exceed 60% AMI.

The IA provision allows projects to leverage tax credits for households across a broader socioeconomic spectrum, and the higher-rent units can offset the lower-rent units making those low-income units more feasible for developers.  The provision will also benefit renters at 60-80% of AMI who previously would not have qualified for LIHTC.

Proposed Changes to TCAC Requirements

The IA provision also prompted the California Tax Credit Allocation Committee (TCAC) to propose two regulation changes that would exceed the minimum federal standard. The proposed changes, as well as the rationale provided by TCAC staff and public comments, will be considered at the May 16, 2018, TCAC meeting. The proposed TCAC regulation changes are as follows:

a.  To qualify for competitive 9% tax credits, the average imputed income for the units would not be allowed to exceed 50% of AMI in any project that includes low-income units for households above 60% AMI.

b. To qualify for non-competitive 4% tax credits, projects that include units targeted at 60% to 80% of AMI would need to achieve average overall project targeting at or below 59% of AMI.

These TCAC provisions allow for the flexibility in the unit mix as contemplated by the new federal rules, while ensuring that average affordability of projects remains low in order to serve the California residents with the greatest need.

Liz Tracey, Senior Principal, is an expert on affordable housing and community development finance using tools such as the Low-Income Housing Tax Credit and New Markets Tax Credits. For information about community development financing resources, contact Liz Tracey at liz@lesardevelopment.com.

Reza Mortaheb, Research Analyst, is an architect, urban planner, and urban researcher who monitors how federal and state housing policy affects housing affordability and community development. Reza can be reached at reza@lesardevelopment.com.

 

State Auditor’s Report Calls for Coordinated Response to Homelessness

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CA Auditor Report on Homelessness in CaliforniaThe California State Auditor on April 19 released a report that highlighted the need for a more coordinated response to homelessness at the state level to reduce the population’s exposure to communicable diseases and to mitigate the financial and physical impact of homelessness on communities.

The audit identified two key reasons California has struggled to reduce the size of its homeless population, which represents nearly a quarter (24%) of the nation’s homeless population. First, until recently California did not have a single entity with oversight for coordinating the many state-funded homeless programs. Second, the state’s investments in administering and funding homeless services are insufficient to reduce the rates of unsheltered homelessness.

To fill these gaps, the auditor’s report calls for funding to enable the statewide Homeless Coordinating and Financing Council to provide funding to hire permanent staff, oversee cross-agency coordination, and help Continuum of Care lead agencies access funding and better coordinate HUD-recommended activities such as the annual Point-in-Time Count, efforts to raise nonfederal funding, and HMIS administration and implementation. The report also calls for a statewide homelessness plan with goals, objectives, timelines, and performance metrics by April 1, 2019.

In addition to proposing action at the state level, the auditor’s report also called for improvements in how the Los Angeles Homeless Services Authority (LAHSA) evaluates and documents funding decisions. Specifically, the report noted that LAHSA “lacks the ability to adequately analyze its funding decisions based on geographic area and does not have an adequate database to track the results of its application evaluation process.”[1]

Recommendations for LAHSA include updating and reviewing its policies and procedures on a regular basis and providing technical assistance to expand the number of service providers. The auditor’s report also recommends that LAHSA regularly track application evaluation data and analyze the results of its technical assistance.

Kris Kuntz, Senior Associate, is passionate about creating innovative solutions to address homelessness. To learn more about LDC’s work with homeless assistance systems, contact Kris Kuntz, Senior Associate, at kris@lesardevelopment.com.

[1] California State Auditor. (April 2018). Homelessness in California: State Government and Los Angeles Homeless Services Authority Need to Strengthen Their Efforts to Address Homelessness.

Four Actions to Remedy Housing Segregation

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“The Color of Law” Author Richard Rothstein with LeSar Development Consultants staff at “Charting the Course: Celebrating the 50th Anniversary of the Fair Housing Act”

In The Color of Law: A Forgotten History of how our Government Segregated America, author Richard Rothstein tackles the misconception that private prejudice coupled with private lending practices led to racial segregation in America. Instead, he contends that government policies—including lack of enforcement of the Fair Housing Act—promoted the patterns of segregation that still exist today. At the San Diego Regional Alliance for Fair Housing Conference, which took place in early April, Rothstein recommended four action steps to reverse housing segregation in the United States:

(1) Promoting the purchase of market rate homes by local government for sale at lower prices to populations affected by housing segregation

(2) Withholding mortgage interest deductions from communities that refuse to desegregate;

(3) Reforming low-income housing tax credits to promote development outside of low-income communities; and,

(4) Enhancing Section 8 vouchers to allow renters to live outside of low-income communities.

Promoting Local Government Purchase and Sale of Homes

To increase residential integration, Rothstein suggests local governments could buy homes in predominantly white neighborhoods and offer them at a subsidized price to households affected by housing segregation.

Withholding Mortgage Interest Deductions from Segregated Communities

Although the tax reform bill that passed last year downsized the mortgage interest deduction, it is still regressive, benefitting wealthier households more than others. The deduction subsidizes homeownership, redistributing wealth to richer households, and encourages the construction of larger, more expensive housing. Additionally, the government spends four times more on subsidies for mortgages than supporting renters or people who live in affordable housing.[1] Rothstein suggested that communities that refuse to desegregate and continue to block low-income projects in their neighborhoods should have their mortgage income deductions withheld until residential integration in their community is implemented.

Reforming LIHTC to Develop Projects Outside of Low-Income Communities

Rothstein argues that federal subsidies such as the Low Income Housing Tax Credit program (LIHTC), which subsidizes the development of affordable housing, and Section 8 vouchers promote racial segregation in communities. A review of federal data by the New York Times found that in the nation’s largest metropolitan areas, low-income housing projects that use federal tax credits are disproportionality built in high poverty and high minority neighborhoods.[2]

Enhancing Section 8 Vouchers

Many of the 2.2 million households that receive Section 8 vouchers remain in low-income neighborhoods and are unable to rent in more affluent areas. Rothstein proposes reforming these federal programs to remedy segregation, by improving the Housing Choice Voucher Program to allow low-income renters to live in middle income neighborhoods.

Whatever resolutions are proposed to address housing inequality, Rothstein argues that combatting deeply entrenched segregation will require a better public understanding that it is a result of decades of policymaking by local, state and federal governments. Only by accepting that segregation is a government-sponsored system can we create equally effective government policies to reverse it.

Artemis Spyridonidis covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about linkage fees and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

[1] https://www.citylab.com/equity/2015/04/the-us-spends-far-more-on-homeowner-subsidies-than-it-does-on-affordable-housing/390666/

[2] https://www.nytimes.com/2017/07/02/us/federal-housing-assistance-urban-racial-divides.html?smid=tw-share&_r=1

Bay Area Begins to Feel Effect of SB 35

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Developers across the Bay Area have begun to leverage SB 35, one of the bills in the 2017 Housing Package, to accelerate housing production for households at all income levels across California. Authored by Sen. Scott Wiener (D-San Francisco) SB 35 provides for a streamlined and ministerial approval process for developments in jurisdictions that have failed to meet their Regional Housing Needs Allocation (RHNA) goals. To take advantage of SB 35, the development must be proposed for an infill site, comply with existing residential and mixed-use zoning, allocate at least 10% percent of its units to affordable housing, and conform to the prevailing union wage.[1]

In March, Blake Griggs Properties became one of the first developers to invoke SB 35 for a 260-unit housing project in Berkeley which has been delayed for almost five years by a lengthy environmental review. The proposed multifamily residential project would replace a parking lot and earmark 50% of the projected units for lower-income housing.[2]

Sand Hill Property Company, another Bay Area developer, has used SB 35 to streamline the approval process for a redevelopment plan envisioned for the derelict Vallco Shopping Mall in Cupertino. The proposed project is a mixed-use complex that promises to set aside two-thirds of its development area to housing, and also designate half the projected 2,400 multifamily units as affordable housing. SB 35 requires the City of Cupertino to respond to the developer’s proposal within 180 days.[3]

San Francisco-based nonprofit Mission Economic Development Agency (MEDA) also invoked SB 35 to build a 130-unit, 100% affordable housing project in San Francisco’s Mission District. Once a critic of SB 35, MEDA is now hoping that the law will override, or at least expedite, San Francisco’s cumbersome entitlement process for the proposed project.[4]

While proponents are hoping that SB 35 would break through legislative barriers, cut lengthy approval processes, and trigger construction of badly needed affordable housing, critics have voiced concern that SB 35 decreases the authority of local governments over land use, deprives local communities of their rights to oppose a project, and increases the extent of state intervention in local affairs. Moreover, in many communities, the new development’s conformance with “neighborhood character” is still a controversial issue. Affordable housing advocates, MEDA included, render SB 35 as a “one-size-fits-all” policy, arguing that the bill requires a scant amount of affordable housing and it may even cause displacement and gentrification in low-income neighborhoods.[5]

Artemis Spyridonidis, Senior Associate, covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about linkage fees and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

[1] Leginfo, “Senate Bill No. 35,” Published on September 29,2017. Date of Access 04-24-2018. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB35. And, California Department of Housing and Community Development, “California’s 2017 Housing Package,” 2017, Date of Access 04-24-2018. http://www.hcd.ca.gov/policy-research/lhp.shtml

[2] San Francisco Business Times, “Stalled for five years, 260-unit Berkeley housing project will be California’s first to use streamlined approvals,” Published March 8, 2018. Date of Access: 04-26-2018. https://www.bizjournals.com/sanfrancisco/news/2018/03/08/berkeley-housing-affordable-sb35-approval-wiener.html

[3] Vallco Town Center, “The Future of Vallco,” April 2018, Date of Access: 04-25-2018. http://revitalizevallco.com

[4] San Francisco Chronicle,” Mission housing project invokes law to exchange review for affordable units,” Published on April 7, 2018. Date of Access 04-24-2018. https://www.sfchronicle.com/politics/article/Mission-housing-project-invokes-law-to-exchange-12815332.php

[5] Ibid.

LA Motel Conversion Ordinance to Increase Housing Production

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On April 17, Los Angeles Mayor Eric Garcetti signed a local ordinance that will enable owners of underutilized hotels and motels to convert these facilities into transitional or supportive housing for people experiencing homelessness or who are at risk of becoming homeless. The Los Angeles City Council had previously voted 13-0-2 in favor of the ordinance. The ordinance supports efforts outlined in the City of Los Angeles Comprehensive Homeless Strategy Report to promote the adaptive reuse of private properties that could accelerate the cost-effective development of transitional and supportive housing to provide shelter and supportive services for people experiencing homelessness. Key components of the ordinance include:

a. All units must be used for transitional and/or supportive housing, but the project will not increase the floor area, building footprint or height, or number of units.

b.  Projects will maintain a minimum 20:1 ratio of dwelling units to on-site supportive services offices, but supportive services cannot exceed 10% of the total floor area. Projects with fewer than 20 units are required to have at least one office.

c. Projects that have a Certificate of Occupancy will not be subject to additional zoning ordinances, and interior alterations, such as adding in-unit cooking facilities, can be made.

d. All project will be reviewed by the Department of Building and Safety to ensure that they meet application requirements, zoning compliance, and performance standards. These standards require the applicant to have an executed contract with a local agency to provide housing onsite with links to services either onsite or offsite.

e. The project cannot reduce the number of onsite parking spaces, and must adhere to requirements related to security night lighting, recycling, and trash facilities.

f. When no longer needed for transitional or supportive housing, the facility may be returned to its original use and any space repurposed for supportive services can be converted back to guest rooms or dwelling units provided it does not result in the facility exceeding its Certificate of Occupancy.

g. Projects cannot result in the alteration of buildings listed or nominated as historic buildings without appropriate consultation with the Office of Historic Resources.

Jessica Ripper, Senior Associate, covers issues at the intersection of housing, health, and human services, and also manages marketing and business development. Jessica can be reached at jessica@lesardevelopment.com.

 

City of San Diego Explores Preserving Affordable Housing, Preventing Residential Displacement

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The City of San Diego Smart Growth and Land Use (SGLU) Committee on April 18 held workshops on preserving at-risk and expiring affordable housing and preventing residential displacement.  Although the Committee took no action, scores of housing practitioners, community leaders, and residents attended, including many apartment owners and tenants who provided non-agenda public comment on rent control.

Presentations by industry leaders and city staff outlined the need to preserve affordable housing.  Between 2000-2017, the County of San Diego lost a total of 1,236 affordable homes; of those, 701 were located in the City of San Diego.[1]  San Diego County currently has 2,306 units at high or very high risk of converting from affordable to market-rate.[2]  This loss is partially due to a steep decline in funding; between 2008 and 2015, state and federal housing for San Diego County declined by 69% from a combined $180 million to just under $60 million.[3] Specific recommendations to preserve affordable housing included hiring a Preservation Coordinator, strengthening regulatory protections for tenants, and increasing funding for preservation purchases.

LDC alum and SGLU Committee Consultant Keryna Johnson presented on preventing displacement, which occurs when a household is forced to move, either because living there is impossible, they feel threatened, or because the home is no longer affordable.  In San Diego, where housing prices and homelessness continue to soar, concerns about displacement extend beyond moving from one home to another, less desirable home. Many San Diegans fear that displacement will also result in homelessness.

Artemis Spyridonidis, Senior Associate, covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about linkage fees and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

[1] California Housing Partnership, “Best Practices in Local Government Preservation Strategies”

[2] California Housing Partnership, “Best Practices in Local Government Preservation Strategies”

[3] California Housing Partnership, “Best Practices in Local Government Preservation Strategies”

SD Board of Supervisors Examines Strategies to Address Housing Affordability

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On April 18, the San Diego County Board of Supervisors voted 4-0-1 to direct the Chief Administrative Officer to investigate strategies for increasing housing production in the unincorporated region at all income levels through incentives and changes to regulatory policy. The analysis will focus on streamlining permitting, updating zoning regulations and parking requirements, decreasing production regulations, and exploring density bonuses and alternative housing types such as accessory dwelling units and prefabricated homes. The Chief Administrative Officer will provide recommendations on improving housing affordability to the Board of Supervisors within six months.

Jessica Ripper, Senior Associate, covers issues at the intersection of housing, health, and human services, and also manages marketing and business development.

 

 

Riverside City Council Adopts Housing First Strategy

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The Riverside City Council voted unanimously on March 13 to adopt a Housing First strategy that aims to shift City resources from managing homelessness to ending it by increasing the availability of supportive housing options for people experiencing  homelessness. As part of the plan, the City adopted the Housing First model, made recommendations for operationalizing the model, and identified potential sites for development in each ward. The Housing First strategy builds on the region’s success of functionally ending Veteran homelessness in 2016 and lessons learned, including using Housing First, ensuring leadership, and acting with a sense of urgency. The City Council also authorized partnerships with the following entities:

  1. County of Riverside Department of Behavioral Health to be the applicant for No Place Like Home bond funds from the State to fund housing and support services to homeless individuals.
  2. County of Riverside Housing Authority to make 389 County-administered Housing Choice Vouchers available within the City for future Housing First developments.