ARTICLE
Key Factors in the Cost of Housing Does “Inclusionary Housing” Help? Measured by our experience in Santa Cruz County the answer to the question, “Do inclusionary housing rules improve affordability?” Must, at best, be, “not much.” The County is consistently among the five “least affordable” places to live, our rents are among the highest in the U.S. This, notwithstanding an array of public housing projects and inclusionary housing rules. The Planning Commission will consider yet another attempt to revise the City of Santa Cruz’s inclusionary housing ordinance in the hope of making these provisions more productive. However, there is a significant and growing body of evidence throughout the U.S. that such rules, reducing the cost of a few housing units by transferring those costs to other households in the same development, has little impact on the overall affordability of housing, may reduce the total amount of housing built, and may even reduce the amount of affordable housing that is available. The most accessible and persuasive evidence of this premise is contained in two California Legislative Analyst’s Office reports, California’s High Housing Costs: Causes and Consequences (Mar 17, 2015) and its follow-up Perspective on Helping Low-income Californians Afford Housing (Feb 9, 2016). As discussed in the Chamber’s Feb 11, 2016 eNews “Housing Programs Reduce Affordability’, the LAO’s office recommends that affordable housing funds be redirected to special needs groups (e.g., homeless, disabled) and that local government efforts focus on developing market rate housing. The LAO estimated building sufficient housing to address just the needs of very-low-income Californians would cost $250 Billion (about twice the state’s total annual budget and about the same amount as the state current debts and liabilities.) Vouchers for that population would cost $20 billion per year and, within a short period of time, increase rents for all other Californians. We all recognize that California in general and Santa Cruz in particular are on the more expensive end of an array of factors and circumstances that determine the cost of housing. Here are a few “headlines” from the March 17, LAO article, suggesting reasons that housing costs are high – together with notes about their influence in Santa Cruz County: > Land Costs Are High on the California Coast [Santa Cruz (SC): high costs compounded by the supply of developable land available being small] > Building Costs Are Higher in California [SC: aggravated by high fees and exactions and high process and carrying costs the result slow approval processes] > Community Resistance to New Housing [SC: with few projects eligible for administrative approval] > Environmental Reviews Can Be Used to Stop or Limit Housing Development [local EIR processes, appeals and lawsuits are both commonplace and the source of additional public and private “defensive” time and expenditures for virtually every project. in SC] > Local Finance Structure Favors Nonresidential Development [SC: throughout the county local government do focus resources on commercial opportunities likely to generate local tax revenues.] > Many Coastal Communities Have Growth Controls [SC: beginning with Measure J in 1978 establishing strict urban service lines.] > Topography Limits Developable Land [SC: including emerging concerns regarding impact of sea level rise and geologic stability.] > Redeveloping Land Possible, but More Difficult and Expensive [SC: often including evaluation and restrictions related to historic, arboreal, archeological, environmental and similar impacts as well ask the cost and complexity of demolition, engineering, and remediation of neighborhood impact issues.] Create affordable “workforce” housing is not only desirable but critical to sustain economic vitality in Santa Cruz City and County. But surely, by now, it is apparent that inclusionary housing has not succeeded in producing housing that is affordable... or, for that matter, available even at unaffordable prices. The better question is, “What might work?” Here are a few possibilities: > Encouraging “affordable by design” housing. “Affordable by design” means smaller, more efficient housing units and increased land use intensity. However, it can be built to attract either more upscale or value-focused residents – a choice that should be left to the property owner/developer who will be taking the risk of changing market requirements. Affordable by design can be encourage through a wide range of density bonuses, parking waivers, fees reductions, and similar inducements. > Identifying development sites. The city has already begun a zoning code update including the Mission, Ocean Street, Water Street, and Soquel Avenue corridors. These planning process could simultaneously include engagement with property owners to identify shared interests, priority development opportunities, site-specific requirements, and strategies for development in individual properties. > “Pre-approving” large-scale housing projects. The post-earthquake Downtown Recovery Plan was a model of purposeful development. It was driven by a critical need for rebuilding this key element of the City’s tax base. The City should see today’s housing crisis as an equally crucial need – in the absence of creating workforce housing the exodus of primary businesses in the community will continue and accelerate. A key element of the downtowns earthquake recovery was the creation of a large-scale plan that the City carried through CEQA and other development approval processes creating projects that could be undertaken with only technical review of plans and building processes. Support UCSC efforts to create land-lease housing on and off Campus. UC has undertaken a system-wide effort to substantially increase on-campus housing to support growth. Utilizing land-leases with pre-approved developers, campuses including UCSC will develop new housing to alleviate local housing impacts of growth. It is incumbent upon the City to be strong advocates in obtaining approvals for this development through LAFCO, EIR processes, transportation planning, and other collaborative efforts. Minimizing Develop Costs and Time Uncertainty. The most frequently-heard complaints regarding current housing development processes related to unnecessary project costs. First among these relates to parking requirements that make increasing density unaffordable if not geometrically impossible. The time-to-decision delays are also an unnecessary cost that deters development and increases cost. The City should also search for ways to minimize other upfront development costs and minimize risks to encourage housing development. Sense of Urgency. Perhaps the single strongest area of agreement in the City and much of the county is the importance of address our housing shortage. These issues are coupled with related infrastructure requirements from water to transit. To have a meaningful impact the community’s process will require an impressive level of project planning and implementation constantly reinforced by a sense of urgency. We need to take what we learned in the first Arena project and the Downtown Recovery Plan and apply it to the creation of housing that meets the needs of our community. Most importantly, we need to do these things in a way that will actually result in the development of much more housing than has been built in the past two decades – built to accommodate a range of housing needs, styles, and incomes to addresses the needs of our community. Other recent eNews stories about housing: The Delusion of “Affordable Housing” – The “Where” & “For Who” of Development What Values Control Housing? Boulder, Brown, and Private Capital Weigh In It’s not about prop 13! Fees Reduce New Housing How Much Should an ADU Cost?
Key Factors in the Cost of Housing Does “Inclusionary Housing” Help?
Measured by our experience in Santa Cruz County the answer to the question, “Do inclusionary housing rules improve affordability?” Must, at best, be, “not much.” The County is consistently among the five “least affordable” places to live, our rents are among the highest in the U.S. This, notwithstanding an array of public housing projects and inclusionary housing rules. The Planning Commission will consider yet another attempt to revise the City of Santa Cruz’s inclusionary housing ordinance in the hope of making these provisions more productive. However, there is a significant and growing body of evidence throughout the U.S. that such rules, reducing the cost of a few housing units by transferring those costs to other households in the same development, has little impact on the overall affordability of housing, may reduce the total amount of housing built, and may even reduce the amount of affordable housing that is available. The most accessible and persuasive evidence of this premise is contained in two California Legislative Analyst’s Office reports, California’s High Housing Costs: Causes and Consequences (Mar 17, 2015) and its follow-up Perspective on Helping Low-income Californians Afford Housing (Feb 9, 2016). As discussed in the Chamber’s Feb 11, 2016 eNews “Housing Programs Reduce Affordability’, the LAO’s office recommends that affordable housing funds be redirected to special needs groups (e.g., homeless, disabled) and that local government efforts focus on developing market rate housing. The LAO estimated building sufficient housing to address just the needs of very-low-income Californians would cost $250 Billion (about twice the state’s total annual budget and about the same amount as the state current debts and liabilities.) Vouchers for that population would cost $20 billion per year and, within a short period of time, increase rents for all other Californians. We all recognize that California in general and Santa Cruz in particular are on the more expensive end of an array of factors and circumstances that determine the cost of housing. Here are a few “headlines” from the March 17, LAO article, suggesting reasons that housing costs are high – together with notes about their influence in Santa Cruz County: > Land Costs Are High on the California Coast [Santa Cruz (SC): high costs compounded by the supply of developable land available being small] > Building Costs Are Higher in California [SC: aggravated by high fees and exactions and high process and carrying costs the result slow approval processes] > Community Resistance to New Housing [SC: with few projects eligible for administrative approval] > Environmental Reviews Can Be Used to Stop or Limit Housing Development [local EIR processes, appeals and lawsuits are both commonplace and the source of additional public and private “defensive” time and expenditures for virtually every project. in SC] > Local Finance Structure Favors Nonresidential Development [SC: throughout the county local government do focus resources on commercial opportunities likely to generate local tax revenues.] > Many Coastal Communities Have Growth Controls [SC: beginning with Measure J in 1978 establishing strict urban service lines.] > Topography Limits Developable Land [SC: including emerging concerns regarding impact of sea level rise and geologic stability.] > Redeveloping Land Possible, but More Difficult and Expensive [SC: often including evaluation and restrictions related to historic, arboreal, archeological, environmental and similar impacts as well ask the cost and complexity of demolition, engineering, and remediation of neighborhood impact issues.] Create affordable “workforce” housing is not only desirable but critical to sustain economic vitality in Santa Cruz City and County. But surely, by now, it is apparent that inclusionary housing has not succeeded in producing housing that is affordable... or, for that matter, available even at unaffordable prices. The better question is, “What might work?” Here are a few possibilities: > Encouraging “affordable by design” housing. “Affordable by design” means smaller, more efficient housing units and increased land use intensity. However, it can be built to attract either more upscale or value-focused residents – a choice that should be left to the property owner/developer who will be taking the risk of changing market requirements. Affordable by design can be encourage through a wide range of density bonuses, parking waivers, fees reductions, and similar inducements. > Identifying development sites. The city has already begun a zoning code update including the Mission, Ocean Street, Water Street, and Soquel Avenue corridors. These planning process could simultaneously include engagement with property owners to identify shared interests, priority development opportunities, site-specific requirements, and strategies for development in individual properties. > “Pre-approving” large-scale housing projects. The post-earthquake Downtown Recovery Plan was a model of purposeful development. It was driven by a critical need for rebuilding this key element of the City’s tax base. The City should see today’s housing crisis as an equally crucial need – in the absence of creating workforce housing the exodus of primary businesses in the community will continue and accelerate. A key element of the downtowns earthquake recovery was the creation of a large-scale plan that the City carried through CEQA and other development approval processes creating projects that could be undertaken with only technical review of plans and building processes. Support UCSC efforts to create land-lease housing on and off Campus. UC has undertaken a system-wide effort to substantially increase on-campus housing to support growth. Utilizing land-leases with pre-approved developers, campuses including UCSC will develop new housing to alleviate local housing impacts of growth. It is incumbent upon the City to be strong advocates in obtaining approvals for this development through LAFCO, EIR processes, transportation planning, and other collaborative efforts. Minimizing Develop Costs and Time Uncertainty. The most frequently-heard complaints regarding current housing development processes related to unnecessary project costs. First among these relates to parking requirements that make increasing density unaffordable if not geometrically impossible. The time-to-decision delays are also an unnecessary cost that deters development and increases cost. The City should also search for ways to minimize other upfront development costs and minimize risks to encourage housing development. Sense of Urgency. Perhaps the single strongest area of agreement in the City and much of the county is the importance of address our housing shortage. These issues are coupled with related infrastructure requirements from water to transit. To have a meaningful impact the community’s process will require an impressive level of project planning and implementation constantly reinforced by a sense of urgency. We need to take what we learned in the first Arena project and the Downtown Recovery Plan and apply it to the creation of housing that meets the needs of our community. Most importantly, we need to do these things in a way that will actually result in the development of much more housing than has been built in the past two decades – built to accommodate a range of housing needs, styles, and incomes to addresses the needs of our community. Other recent eNews stories about housing: The Delusion of “Affordable Housing” – The “Where” & “For Who” of Development What Values Control Housing? Boulder, Brown, and Private Capital Weigh In It’s not about prop 13! Fees Reduce New Housing How Much Should an ADU Cost?