Before Final Downtown Plan Vote, City Manager Warns Against Too Much Housing

    Categories: HousingNews
One of several recent housing projects springing up around Downtown Santa Monica.

The Santa Monica City Council will vote tonight on the final Downtown Community Plan amid concerns that last minute changes to the plan’s affordable housing requirements will suppress much-needed housing growth.

However, City Manager Rick Cole, in an email to the City Council sent Saturday warned that there are about 1,200 new apartments that have either been approved or are pending approval in the Downtown area and that the Council should “assess how 1000-1500 new units of market rate and affordable units being constructed in our Downtown in the next couple of years (unaffected by the DCP) will be viewed by the various community stakeholders.”

The comments are in direct contrast to Cole’s characterization of the proposed DCP as a “housing plan” designed to encourage much-needed new housing units in a city that is experiencing a growing affordability crisis due to decades of underbuilding new housing. The plan will govern change in the city’s downtown through 2030.

In the email, Cole said he is responding to concerns that “the new rules [proposed in the DCP] will have the impact of choking off new housing development.” The City Council pivoted abruptly at its July 11 meeting to dramatically raise the amount of affordable housing the plan would require of each new downtown project. Staff and the Planning Commission originally recommended requiring 15-to-20 percent of new projects be affordable. The new proposal, which has come under fire by housing advocates, would require projects to include to 20-to-30 percent affordable units depending on the height of the project.

The revised affordability requirements that the City Council will be voting on tonight.

Until recently, San Francisco had one of the highest affordable requirements in the state at 25 percent, but after that proved to significantly reduce the amount of new housing being proposed, the city decided to roll back the requirements to a maximum of 20 percent. Under Santa Monica’s proposal, 25 percent inclusionary requirements kick in at building heights of 60 feet. Given the example of San Francisco, the requirement will likely function as a de facto height limit.

Cole’s email doesn’t address whether the proposed affordability standards will actually discourage new housing projects from being proposed. Instead, Cole’s email simply points out that about half the number of units projected in the Downtown plan — 2,500 by 2030 — have either been approved or are currently pending approval. But, the email fails to point out that pending projects as often as not don’t move forward.

In fact, according to city staff’s own analysis, which Cole included in his email, there are only 826 approved units. The rest still have to wind their way through the Planning Commission for approval, a process that could take months, if not years. There is no guarantee that pending projects will go forward.

Most recently, The Los Angeles Times architectural critic, Christopher Hawthorne, levied some criticisms of the plan:

“In a larger sense, even a compromise on growth that perfectly calibrates contemporary political feeling in Santa Monica would be lacking because it wouldn’t allow the city to make up for the many decades it spent systematically under-building housing, shutting the door on new arrivals and driving up prices and inequality,” he wrote in his July 22 column.

“The population of Santa Monica — one of the most desirable places to live on the planet — increased a mere 6,500 people, or less than 8%, between 1960 and 2010. Over the same period Los Angeles County’s population grew by more than 60%. Santa Monica has done a very good job insulating itself from growth while reaping the benefits of economic development across the region as a whole. Particularly in terms of housing it has an obligation to do more, to put the drawbridge back down,” he wrote.

Santa Monica is at the epicenter of the region’s worst housing shortage since the end of World War II. Study after study has shown that decades of slow- and anti-growth policies combined with a growing number of jobs have increasingly squeezed lower- and middle-income people out of jobs-rich places like Santa Monica.

Santa Monica’s affordable housing production plan, which requires a certain percentage of affordable units be built as part of any new housing construction, has helped stem the hemorrhaging, but the city’s slow-growth policies have, for more than a generation, restricted the amount of new housing that gets built overall.

The Downtown Community Plan, based on Cole’s email, seems to be a recapitulation of the policies that have turned Santa Monica into a city increasingly inaccessible to only wealthy people or the few lower-income people who get into the scarce affordable units that get built each year.

Staff’s original proposal of 15 to 20 percent inclusionary requirements wouldn’t solve the housing crisis, but those requirements are likely to produce more housing overall — including affordable housing — than what is currently being suggested.

As former Planning Commissioner and long-time observer of Santa Monica politics, Frank Gruber, noted in his most recent column: “Based on this analysis the councilmembers voted to require an on-site affordable housing requirement of more than 20 percent on any market-rate apartment building greater than 50 feet in height, reaching a 30 percent affordable requirement at 70 feet in height. I’d say that these numbers are unprecedented, but in fact they would bring Santa Monica back to where it was in the early 1990s, when it had a 30 percent requirement. For those without long memories, the results of that requirement were (i) no housing got built, and (ii) housing developers sued the City and won, and the City had to revise its zoning so that housing could be built.”

View Comments (8)

  • This column illustrates the tension between factual journalism and community advocacy.

    Much is made by Jason of a line in my email that few can actually argue with: the presence of numerous construction cranes over the next three years along one of Santa Monica's most congested corridors (Lincoln and the 10 Freeway) is likely to spur continuing debate in our community. What's also indisputable is that a lot of housing is breaking ground (or about to) in Downtown Santa Monica.

    Paradoxically, Jason argues that this surge of new housing is a continuation of the slow-down of housing during the recession. In fact, Planning and Community Development Director David Martin and I jointly recommended to the City Council that we postpone consideration of several controversial commercial projects until transparent rules were set by the adoption of a Downtown Community Plan, but that meanwhile we process all the mixed-use housing projects in the pipeline. That is the source of the more than one thousand units I referenced, the vast majority of which are already approved, with two more projects scheduled for final Council review in September.

    Reasonable people can disagree on these contentious issues. But what's indisputable is that overheated rhetoric on both sides of the housing growth issue are part of the Santa Monica landscape. That's ALL I was referring to in my one-sentence comment in my email to Council -- about which Jason wrote an entire column. Ironically, that column only serves to illustrate my point -- that the coming surge will be viewed differently by different stakeholders. Some, like Jason, will complain 1000 units are too little, too late. Others will see it as the definitive end of Santa Monica's unique quality of life.

    And so the debate continues.

    • Interesting response, Rick. Facts versus advocacy. Clearly, the Council's 4-3 vote Tuesday night on the aggressive inclusionary program favored the latter. And it was helped along by your advocacy of the proposal as one more demonstration of how progressive Santa Monica is in Christopher Hawthorne's article last week. I will always find humor in comparing this housing proposal with the plastic bag ban.

      The "debate" Tuesday night did indeed revolve around facts versus passionate advocacy. Let's take a look at some of the facts.

      An important point was raised by Mr. Soloff regarding mitigation of the infeasibility of the off-site option resting from revenues raised by the sale of Low Income Housing Tax Credits, thereby reducing cost to the housing developer. First, receiving 9% LIHTC's is a competitive process, which means that no off-site housing project is guaranteed to receive an allocation. The alternative is 4% LIHTC's, which are much easier to get but result in far less revenues to the project. I assume neither scenario was analyzed by Mr. Silvern. Let us also never forget that LIHTC's are subject to the whims of Congress and the Administration. And their value will be severely reduced if any version of major corporate tax cuts is adopted.

      Here's another fact. Mr. Silvern acknowledged that his prototype, average development cost estimates will result in some mixed use projects not penciling with the new inclusionary requirements. That was the understatement of the evening. I guarantee you that there will be no new housing proposed in the Transit Adjacent District since the costs of the type of construction necessary for such development were not analyzed by Mr. Silvern. The only projects analyzed by Mr. Silvern were those using wood frame construction from the ground up. I know of no such projects that have ever been built in the downtown. Nor would we want them to be because of our preference for ground floor commercial space. This necessitates housing being built on a podium, using Type I construction. A scenario ignored by Mr. Silvern.

      Jason Islas spoke as a Santa Monica resident Tuesday night. Not as an award-winning journalist nor as a member of Santa Monica Forward.

      In believe that, aside from the obvious politics at play, Tuesday night's vote was based on advocacy and passion rather than the reality of housing development facts. I anxiously await updates on the City's housing pipeline and the effects of Tuesday night's vote on how robust it becomes. By the way, there are 828 downtown housing units entitled and 229 units in four vested projects that have not yet received entitlements. Although there is no guarantee that these units will actually be constructed, I certainly hope to see cranes in the skies of downtown
      Santa Monica.

      • Leslie -- I need to clarify one comment you've made about the analytic work we prepared for the Downtown Community Plan. As I advised the Planning Commission during its hearings, the prototypes we tested are all Type IIIb construction, which consists of Type V wood frame construction over a ground floor concrete podium (up to 72 feet), or over two stories of concrete podium (for the 84-foot/4.0 FAR prototype). This is a type of construction that is prevalent in Santa Monica and across the LA region, and our construction cost assumptions reflected those assumptions. And as I also tried to explain (and I know you understand well), "feasibility" is not synonymous with construction costs. Rather, as used in our analysis, it is the relationship between total development cost (not just construction), net operating income and the sale value of the completed development. While there have been some questions raised about our construction cost assumptions, no commentor throughout the entire proceedings challenged our relatively conservative assumptions about the other assumptions used to establish "feasibility,'' which are just as, if not more, important in the overall feasibility math as construction costs.

        • My confusion arose from your pro forma's citing Type V construction and not indicating that it was meant to be Type IIIB. Looking over the forms again, I see that you included costs of the "retail shell" so I assume that is meant to represent the podium and Type IIIB. I also assumed Type V because your hard costs are so low, i.e.a little more than half of those actually being experienced in Santa Monica currently. Its all I could imagine you to mean.

          And, of course, assuming a constant construction interest rate is questionable, which I believe the decision makers must have done. I appreciate your point that revenues were underestimated and the cap rate was conservative, but I'm not comfortable with the notion that it will all come out in the end.

          My concerns really don't matter at this point. The new inclusionary program and the assumptions on which it is based will be tested with the response of the housing development/financing/construction community over the next 6-12 months.

          As a final note, did you test the feasibility of off-site affordable housing using 9% and 4% credits? Mr. Soloff seemed to be saying that equity funds raised under this program would mitigate the infeasibiity of such housing.


          • Not correcting the pro forma construction type row labeling was our mistake. We did not test off-site requirements assuming either 9% tax credits (highly competitive, as you noted) or 4% tax credits (more readily available, but less valuable to the project, as you also noted, particularly if Congress and the Trump Administration significantly lower corporate income tax rates as proposed), due to uncertainty, and because we assumed that the City would hold the developer responsible for the total obligation in all cases.

  • One more comment for the wonks out there. Mr Zane correctly acknowledged Santa Monica's exceeding the housing production goals in the last cycle of the Regional Housing Needs Allocation. But, as you know, the State does not allow carrying over housing production to the next RHNA cycle. And let's not forget that we had redevelopment housing money back then. Those funds produced hundreds of affordable housing units. Citing the sales tax revenues authorized last November is not valid since the housing funds are less than half that generated by redevelopment. And other housing related uses for this money are being discussed.

    There will be a new set of RHNA numbers issued in 2021. And those goals must be incorporated into our next Housing Element with a plan for how the City plans to meet them. We would be foolish not to acknowledge the big role the inclusionary program will play. And to acknowledge ways the City plans to incentivize this production. Since the passage of Measure R, the AHPP and DA's account for the production of almost 1,000 affordable units.

  • Leslie:
    I am not sure that it is productive for either of us to debate the merits of the Council action in this forum. I was simply responding to the mischaracterization of my comments as a warning "against too much housing." I was noting (to the Council) that there will be a lot of new housing built soon and there will be varying community reactions to that reality. That is categorically NOT a warning "against too much housing" since, as City Manager, I have recommended approval of all the projects cited in my email.

  • You're right Rick...the debate has ended. I am hoping that the non-vested pipeline projects resubmit with the new 20% inclusionary requirement and that new mixed use projects apply with the more aggressive inclusionary percentages. We shall see.