Jockeying for a share of housing construction as the market rebounds, cities and counties in the Sacramento region are revising their affordable housing requirements to reduce the burden on builders.
The changes are backed by the building industry but have drawn protests from advocates for low-income tenants.
“It’s a race to the bottom,” said Darryl Rutherford, executive director of the Sacramento Housing Alliance.
Mixed-income, or inclusionary housing policies, require that new housing developments include a certain percentage of units – usually rental apartments – that are affordable to low-income residents. Many jurisdictions around the region adopted such policies in the past 20 years, but developers have chafed under them, saying they increase the cost of building.
In 2011, the city of Folsom sought to eliminate its inclusionary requirement, arguing that it stymied development and consequently failed to provide housing for any income level. To settle a lawsuit brought by the Sacramento Housing Alliance, the Folsom City Council subsequently agreed to retain the inclusionary provision but reduced the required allocation of units for low and very low-income categories to 10 percent from 15 percent.
In January, the Sacramento County Board of Supervisors followed suit, reducing its requirement for affordable units in new developments to 10 percent from the previous 15 percent.
Sacramento County’s inclusionary requirement was “a huge roadblock” to development, said John Costa, spokesman for the North State Building Industry Association. Costa said the association has lobbied against inclusionary housing because current programs aren’t effectively addressing the affordable housing issue. In unincorporated Sacramento County, for instance, 263 affordable units have been built under the county’s inclusionary policy since 2004, compared with more than 1,500 units in Elk Grove, where developers pay fees instead, he said.
Developers look at the total cost of doing business, Costa said, and the ability to do business affects where they are able to build. The cost of providing affordable units within market-rate developments is passed on to buyers of the market-rate homes, he said.
Rob Wiener, executive director of the California Coalition for Rural Housing, agreed that inclusionary housing is contingent on development.
“The recession resulted in fewer new units, and it only works if you have new production,” he said. But he and fellow affordable housing advocates say the alternative policies cities and counties are now pursuing hold even less promise.
The city of Sacramento is working to revise its affordable housing policies. One possibility: allowing developers to pay a fee instead of setting aside 15 percent of units for low-income residents.
In a report to the City Council in September, city staff called the current ordinance “inflexible” and said the rules have led developers to construct massive affordable housing projects next to single-family homes – a trend seen frequently in North Natomas.
City officials said the fees would also give the city an important financing tool for affordable housing projects following the state’s elimination of redevelopment subsidies.
But affordable housing advocates say they fear that the fee won’t be high enough to actually pay for construction of the affordable units.
“We think a mixed-income housing ordinance is a way to develop safe, sustainable, healthy, inclusive communities,” Rutherford said, a way to ensure that people of all income levels have access to good schools, grocery stores, parks and open space.
Wiener lamented that even the city of Davis, long lauded for its affordable housing efforts, is now offering developers alternatives to inclusionary housing. “Davis was the poster child, one of the best in the United States,” he said, “but not anymore.”
Sacramento and Davis officials defend their efforts to provide more flexible affordable housing policies.
Sacramento city planners Greg Sandlund and Tom Pace said the city does not propose to do away with the inclusionary requirement, but instead expand it beyond new growth areas – North Natomas, the south area near Elk Grove, and the former downtown and Curtis Park railyards – to apply citywide.
They say the proposed fee would be available only to developers of smaller, infill projects. “For larger developments, over 50 acres, there would be some degree of build requirement, land dedication or 10 percent affordable requirement,” Sandlund said.
Developers of smaller projects who opt for in-lieu fees would be required to build smaller homes on smaller lots, with the idea being that they would likely be affordable to people in the upper low-income or lower moderate-income ranges, the city planners said. Other strategies, such as fee deferrals, allowing developers to pay development fees when they obtain certificates of occupancy rather than when they pull the building permits, could help reduce financing costs for projects. Builders could then pass that savings along to homebuyers.
Sandlund and Pace said the validity of inclusionary requirements for apartment projects has been called into question by a 2009 court ruling in a Los Angeles case that found that city’s inclusionary requirement for a rental development effectively set the rent for the units and ran afoul of a state law that prohibits rent control.
Danielle Foster, Davis’ housing and human services superintendent, said inclusionary housing has been part of the city’s affordable housing policies since 1987 and still is, but the policy has been modified over the years. Changes approved last summer acknowledge the costs and constraints associated with higher-density developments as well as the loss of redevelopment funds, a major source of money to build affordable housing. Davis used to receive $2 million a year in redevelopment revenue for affordable housing, Foster said. With the loss of those funds, the city decided to expand the allowance of in-lieu fees.
“Higher-density developments have more difficulty incorporating affordable units, and in-lieu fees provide another revenue source,” Foster said.
An additional option is to build an accessory unit, or secondary dwelling on a single-family lot, either attached or detached from the primary residence. Such dwellings would fulfill half the per-unit inclusionary requirement, and they would have to have features, such as an entrance separate from the primary residence, to discourage use as just an extra bedroom or storage space. Foster said concerns have been expressed about the affordability of secondary units because they would not be deed-restricted, and the city would not monitor the amount of the rent or who rented them.
Elk Grove has never had an inclusionary housing policy, choosing instead to collect fees from developers of market-rate housing projects. The city then makes that money available to developers of affordable housing projects, primarily multifamily rental complexes, said Taro Echiburu, city planning director.
“That is where the development dollars do the most good,” he said.
Sarah Bontrager, Elk Grove’s housing program manager, said the city has had some voluntary inclusionary housing, with a couple of developers choosing to incorporate affordable units in their projects. But she said in-lieu fees allow the city to leverage other dollars.
Elk Grove also offers a down-payment assistance program to foster home ownership.
One thing city officials and affordable housing advocates agree on is the need for more funding for affordable housing. They voiced support for Senate Bill 391, known as the California Homes and Jobs Act, which would impose fees on real estate transaction documents to provide an ongoing source of funds for low-income housing. The bill was passed by the Senate but remains under review in the Assembly.
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