Leaders largely in support of housing policy changes

BY ERIC LINDBERG
DAILY SOUND STAFF WRITER

Changes to legislation that requires developers to include affordable units or pay a fee when building housing in Santa Barbara drew a wide spectrum of opinion from city leaders on Tuesday evening.
On a 6-1 vote, the City Council approved, in concept, changes that would bring projects involving between two and nine units into the fold of the city’s inclusionary housing ordinance, which currently applies only to projects with 10 or more units.

Those strongly in favor of the proposal said doing so will help boost the housing stock for middle-class residents looking to buy a home.
“We don’t have any other effective way to subsidize workforce housing,” Councilmember Das Williams said.
At the other end of the spectrum, Councilmember Dale Francisco, the sole vote against moving the legislative changes on for drafting and final approval, said he is philosophically opposed to the concept of inclusionary housing, describing the concept as forcing homebuilders to shoulder the burden of providing affordable housing.
“It’s extortion,” he said. “That kind of fundamental injustice should not be part of any city policy.”
Adopted in 2004, the city’s inclusionary housing ordinance requires projects with 10 or more units to make 15 percent of those units affordable to middle-income homebuyers or fork over an in-lieu fee.
Since establishing the program, every developer has chosen to build the required affordable units rather than pay the fee, said Steven Faulstich, the city’s housing programs supervisor. Those projects have brought in 72 affordable units in the past four years, along with the associated market-rate units — a figure not enumerated during the meeting.
But Faulstich said in the past two years, a total of 59 condo conversions have been approved that are exempt from the ordinance since they are in projects smaller than 10 units. Another 56 units that would be exempt are pending approval.
“If you do the math … it shows that more than 50 percent of the units in condo conversions are in projects of two or three units,” Faulstich said.
Following a series of public meetings, a majority of city leaders deemed it appropriate to look into lowering the threshold of the ordinance to cover smaller projects.
As a result of those meetings, changes proposed Tuesday evening included applying the legislation to two-unit projects and up, but reducing the percentage of units that would have to be affordable to 5 percent for projects between two and nine units.
As a result, those projects would likely be forced to pay the in-lieu fee, calculated at $17,700 for each market-rate unit in the project. Those funds collected by the city would be used to subsidize affordable housing projects or buy back affordable units from owners who defaulted on loans.
Williams said had those changes been part of the ordinance from the beginning, the city would have made an estimated $3.5 million in fees from projects smaller than 10 units.
“I think about how many folks we could have housed already if we had done this initially,” he said. “…$3.5 million isn’t the silver bullet, but it’s a significant amount of money.”
However, Francisco said the concept of inclusionary housing, however well-intentioned, is ultimately ineffective in a city with such limited development possibilities.
“Finding more housing for middle-class people is a great thing,” he said. “…But I think inclusionary housing is one of the worst tools we can use to effect change.”
Those affordable units being built as a result of the current legislation are receiving hundreds of applicants, he said, and the city will never be able to come close to meeting the demand for housing on the South Coast.
He also argued that the impact of more luxury units far outweighs any benefit.
“It’s inherently counter-productive,” he said, noting the increased demand for service workers created by building high-end units.
While noting the changes are not a panacea, but merely one mechanism that will assist the city in developing workforce housing, Councilmember Helene Schneider said they would have a bigger impact on the housing stock than current legislation.
“Certainly what we have here, I think, closes some major loopholes that the current ordinance has in place,” she said.
Other than Francisco, city leaders seemed largely in agreement, although Councilmember Iya Falcone expressed concern about potential impacts on developers of smaller projects, those involving between two and four units.
“I’m concerned that the unintended consequence is we are going to be impact what can be called the ‘mom and pops,’” she said.
Paying $70,000 of in-lieu fees for a four-condo project might be too much for a smaller builder, she warned, suggesting that city leaders set the ordinance threshold at five-unit projects and up. Nonetheless, she offered her support when it came to a vote.
“It’s not without tremendous concern on my part,” she said.
The city’s Ordinance Committee and Finance Committee will discuss the changes and draft final language before it returns to the council within 120 days.