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Affordable Housing Ordinances Lose Favor Amid Recession

The recession has hindered the production of affordable housing in California – even while it has heightened the demand for affordable housing. Yet cities in California are increasingly moving away from affordable housing requirements.

Two cities in inland Northern California have, within a week of each other, scrapped what were key components of their strategies to develop affordable housing. In Sonoma County, the Rohnert Park City Council voted to rescind its commercial linkage fee, which tied commercial development to a city fund for affordable housing. The fee was imposed, on a sliding scale, on all non-residential construction in the city.  It reportedly generated only $25,000 over the past three years and yet was considered by the majority of the City Council to be an undue hindrance to commercial developers.

Near Sacramento, Folsom made an even more dramatic move, by scrapping its inclusionary zoning ordinance. The ordinance required large developments to dedicate 15% of their units to low- and moderate-income residents. Folsom officials say that, ironically, getting rid of the ordinance may actually result in the production of more affordable units.

Both cities present arguments that may, for as long as the recession lasts, carry weight among developers and residents alike.

"The trend has been toward relaxation of fees and cities being far more amenable to trying to take steps to try to stimulate development," said land use attorney Todd Williams, a partner at Morgan Miller Blair who advises both cities and developers on affordable housing issues.

Even for cities staunchly dedicated to providing affordable housing, inclusionary zoning has always been a controversial method of doing so.

"When you are required to essentially give away 15 homes below cost, you're eating up all the (profit) and there's no reason to build the project," said John Beckman, executive officer of the California Building Industry Association's Delta Chapter. "That just prolongs the current economic calamity."

Folsom adopted its ordinance somewhat under duress. It was among a suite of policies instituted in the wake of a 2001 lawsuit, brought by Legal Services of Northern California, claiming that the city had grossly shirked its legal responsibilities to provide affordable housing. Its housing element was found to be deficient and plaintiffs contended that the city simply had no interest in housing lower-income residents.

"The deficiencies that we saw were that the city did not have enough sites that were suitable for affordable housing for all income levels, primarily lower income households," said Mona Tawatao, regional counsel with Legal Services.

That suit ordered the implementation of the inclusionary zoning ordinance, calling for 10% of units to be allocated for very low-income residents and 5% for low income. According to the suit's plaintiff, those efforts have largely succeeded.

"Based on the city's own report we would say that the ordinance was very effective," said Tawatao. "264 units were generated as a result. Also because of the litigation and continued pressure that people who need affordable housing and developers put on Folsom subsequent to that there have been affordable housing developments that have come forward."

Though this new policy may seem like a backslide, city officials insist that it is anything but. Miller noted that the economic climate simply cannot accommodate regulations that hinder development. He also said that, because of the down economy, the city issued only 23 building permits last year and a correspondingly miniscule number of affordable units in a city of over 72,000 residents.

Folsom's 2006 Regional Housing Needs Assessment called for the city to add roughly 480 total units per year, including over 1,800 low-income units between 2006 and 2013. A recent study of Folsom's housing capacity found that the city has the capacity to meet these goals but that it must up-zone a small amount of land to accommodate all the needed low-income units.

But Miller insists that the city is not using the economy as a Trojan horse for efforts to dampen the production of affordable housing. To the contrary, they say, the elimination of inclusionary zoning will stoke development in the city and free up the city to develop affordable housing of its own – rather than rely on developers to come along and submit to the inclusionary zoning requirements.

"If you're doing inclusionary housing….15% times 0 equals 0," said David Miller, community development director for the City of Folsom. "The program that we had was a disincentive to the production of housing because it put another impediment in place.  We're all having problems getting new housing in the ground."

The city intends to proactively produce affordable housing units rather than rely on the private market. Miller said that the city is using its redevelopment set-aside as well as funds from a $1.5 million housing trust fund to invest a total of $9 million in two projects that will total 130 affordable units.

"I think that's a heck of a lot more robust program than you'd have if you were waiting for people to build market-rate," said Miller.

Folsom's critics, though, are not convinced yet.

"They've repealed this program and this system that the city said would generate 405 units to meet its state-allocated need but they have not come up with any program or any mechanism to replace it," said Tawatao. "Our position is that their repeal without replacement is a violation of state housing element law."

Tawatoa added that the possibility of legal action is "on the table."

A lawsuit would possibly be only slightly less palatable than the resistance Miller has faced in implementing inclusionary zoning. In fact, he said that by directing affordable housing to the city's urban core – decoupled from any market-rate developments – he can garner more public and political support.

"My (city) council said that we like what you're doing because now we can go downtown or near TOD and we don't get neighborhood opposition," said Miller. "And we don't get the negative market impact on sales prices of other units."

Though Rohnert Park's commercial linkage fee may seem somewhat arbitrary, the connection between job density—especially of low-paying jobs—and housing demand should not be ignored, some say. (Rohnert Park officials did not respond to repeated interview requests.)

"I actually think the economic situation dictates that the opposite happens: that there be not just inclusionary zoning but other mechanisms that ensure that people getting back on their feet have a place to live," said Tawatao. "It doesn't do any good to have unsheltered people or to have people living super-far distances away or to live in substandard housing."

Williams noted that both of these actions come on the heels of a contentious, and highly publicized fight over affordable housing in nearby Pleasanton (see CP&DR blog March 26, 2010). There, the city was found to have stifled the production of affordable housing, far short of its allocation determined in a 2001 Regional Housing Needs Allocation. A March 2010 court ruling ordered the city to zone more land for affordable housing.

For all the advocates who want to see more affordable housing, there remains a strong campaign to relax ordinances such as Folsom's and Rohnert Park's. The BIA, through its various chapters, has been waging an aggressive campaign to relax any laws that would hinder developers.

Beckman, of the BIA's Delta chapter, said that he has been negotiating with the City of Ripon for almost five years to encourage the city of relax its inclusionary zoning ordinance. And while Tawatao ponders legal action to encourage Folsom to shore up its plans, Beckman said that his organization may end up suing Ripon to do the opposite.

Contacts:

Mona Tawatao, Attorney, Legal Services of Northern California, (916) 551-2150

David Miller, Community Development Director, City of Folsom  (916) 355-7222

John Beckman, Executive Officer, Building Industry Association of the Delta

(209) 235-7831 

Todd Williams, Partner, Morgan Miller Blair, (925) 979-3352