“Inclusionary” Housing: Who Gets Included?:

As a community with a conscience and a commitment to families, Santa Monica leverages local money to purchase and rehabilitate existing affordable housing, build new affordable rental units, and create new affordable home ownership opportunities. Our best and very significant efforts still aren’t enough.With median condominium prices in Santa Monica neighborhoods ranging from $610,000 to $844,000, and median market rate monthly rents for two-bedroom apartments at $1,775, we face a deepening crisis in affordable housing. We personally may enjoy housing stability, but our friends, our parents, and even our own grown children can’t afford to become our neighbors. If our own financial circumstances change, or our household grows, we too may find ourselves at risk, forced to leave Santa Monica.We need to evaluate housing production not only for those on low incomes, but for middle-income families. We should work to create not only rentals, but affordable housing ownership opportunities.Affordable housing has become scarcer partly because a booming real estate market drives up land costs. Can we harness some of that economic energy to produce affordable housing for us residents, for working families, seniors and the next generation of Santa Monicans?At a May City Council meeting, we explored a proposal to return Santa Monica neighborhoods to what is called “inclusionary” housing. This simply means that a housing developer would have to include affordable units in multi-family Santa Monica projects above a certain size, helping our community balance its housing needs. Single-family homes would not be affected. Inclusionary housing is not a new idea. When Santa Monica voters passed Proposition R in 1990, we decided that 30 percent of new multi-family housing in our city should be affordable. For years thereafter we required developers to provide inclusionary units, with few exceptions.The late 90s, though, found us in a very different post-earthquake recessionary housing market. Developer attorneys threatened our affordable housing production law, arguing that we risked building too little housing overall. Santa Monica policy changed to allow developers to pay cash (so-called “in-lieu fees”) for the production of affordable housing someplace else in town, completing their own apartment or condominium projects with no affordable units on-site.For a while, even though the in-lieu fees turned out to be far too low, by using redevelopment funds and other sources we were able to produce the affordable housing Santa Monica voters asked for in Prop. R. However, as we’ve entered the 21st century, with land and construction costs still rising, some years we have fallen behind our 30 percent mandate.Clearly it is time to rethink our policies, and last May our City Council commissioned a study on new options, one of which is a return to inclusionary affordable housing in our residential neighborhoods. Why might this be such a good idea?When we build our affordable housing with public funds and accumulated in-lieu fees, it tends to create separate affordable buildings. While our local non-profits like Community Corporation have done a superlative job of producing top-notch projects indistinguishable from market-rate construction, we still fall short on letting people of different income levels live side-by-side.What’s more, reliance on certain funding sources actually restricts our ability to create housing for deserving Santa Monica residents and local workers. Federal law prohibits units built with any federal money from enjoying Santa Monica’s usual preference for residents who’ve been displaced, or workers who are already committed to Santa Monica jobs and for whom housing here could mean reduced commutes and less traffic on our roads. Inclusionary housing units could make possible those sensible preferences.Most importantly, inclusionary housing means the very developers whose market-rate projects now compete with more needed affordable housing for scarce available land would help us solve the public policy problem their privately profitable activities have helped create. In the seven years since inclusionary housing was last considered, housing production has thrived and profitability risen. No longer can it reasonably be argued that making some small part of new apartment and condominium projects affordable will constrain construction. Recent court decisions support a community’s interest in housing affordability.We need housing not only for the low-income families among us, but for the essential middle class now being forced out of Santa Monica by gentrification. We could create an inclusionary housing program like the one recently adopted in Davis, California, where a percentage of new multi-family units must be affordable to middle-income residents like teachers and hospital workers. Such a program can encourage realistic home ownership opportunities.Requiring inclusionary affordable housing is unlikely to significantly increase the price of housing for other new residents. Those prices are determined by regional competition, wherein the developer seeks the maximum the market will bear. If the price of the market-rate units doesn’t go up, where does the affordability subsidy come from? Developers may see slightly smaller profits, or be more selective in purchasing potentially profitable local land. Channeling neighborhood housing construction in Santa Monica toward greater affordability is such a worthwhile goal, based on our shared community values, one might wonder who could oppose it? Attorneys representing developers may claim that inclusionary housing will make it “substantially more difficult if not impossible to build new housing in Santa Monica,” but the facts of the matter and our history in Santa Monica show otherwise.The City Council has recently and correctly adjusted the in-lieu fees to reflect the reality of today’s real estate and housing markets. Now it’s time to return Santa Monica to inclusionary housing, permanently assuring the affordability we voters demanded with Prop. R.McKeown is City Council liaison to the Santa Monica Housing Commission