• A sign next to palm trees

      Alhambra Bean Track (Photo – Zeetz Jones)

      Everyone agrees that California needs more housing—but what it really needs is more affordable housing.

      By Sean McMorris

      California lacks 1.4 million Affordable Housing units (as defined below) necessary to meet the demands of its very low and extremely low income populations. The shortfall is much greater if low- and-moderate-income populations are included.

      California has so few Affordable Housing units because, of course, housing developers want to build housing units that the landlord can rent without restriction at whatever price the local market is willing to pay (“Market Rate”), so that the developer gets the highest possible return on investment. Even if significantly more Market Rate housing is built in the short term, the crisis is only going to get worse for low- and moderate-income residents.

      The State of California and California municipalities must act to fill the Affordable Housing gap.  Affordable Housing developments and inclusionary housing ordinances are currently the primary means for cities to fulfill their Affordable Housing obligations, as outlined by the Southern California Association of Governments Regional Housing Needs Assessment for each California city.

      As the City of Alhambra ponders an inclusionary housing ordinance, as well as a new Affordable Housing development just off Main Street, questions have arisen as to what constitutes “affordable” and “inclusionary” housing. This article answers some of those questions, provides data about the extent of the affordable housing crisis, and suggests solutions adopted by cities in the region.

      What is Affordable Housing?

      In general, Affordable Housing is housing that is affordable to most people and is restricted to households earning at or less than the Median Household Income (as defined below) for the area.  These households include many teachers, EMTs, law enforcement officials, janitors and caregivers—the people who make a city run.

      Useful Definitions

      Housing and Urban Development (HUD): The federal agency that provides cities with funds for housing and other programs that support low and moderate income residents. HUD also provides guidelines for defining Low, Moderate, and High Income households.

      Area Median Income (AMI): Median means the middle. Area Median Income is the middle-income bracket of an area (often a county) at which 50% of household incomes fall above and 50% fall below. Alhambra and Pasadena are part of Los Angeles County’s AMI. HUD uses AMI to determine who qualifies for various types of Affordable Housing. 

      Median Household Income:  Median Household Income is the value below which 50% of households fall. According to the U.S. Census Bureau, Alhambra’s Median Household Income (“Household” can be one person living independently or a family sharing income under one roof) is $55,401. Therefore, generally, 50% of Alhambra’s household population has an income of less than $55,401 or more than $55,401 annually. According to HUD, L.A. County’s 2019 Median Household Income for a family of four is $73,100.

      Extremely Low Income Housing: Housing designated for households with incomes of less than 30% of AMI. For L.A. County in 2019 that is $21,950 for a household of one and $31,300 for a household of four.

      Very Low Income Housing: Housing designated for households with incomes of less than 50% of AMI. For L.A. County in 2019 that is $36,550 for a household of one and $52,200 for a household of four.

      Low-Income Housing: Housing designated for households with incomes of less than 80% of AMI. For L.A. County in 2019 that is $58,450 for a household of one and $83,500 for a household of four.

      Moderate Income Housing: Housing designated for households with incomes that are less than 95% or 120% of AMI (it varies), based on rent of not more than 30% of household monthly income.

      Set-Aside Housing: Housing designated, or “set-aside,” as “affordable” within a larger development of Market Rate housing units, or as a separate complex as a condition of approval for a Market Rate housing development.

      Facts

      57.4% of Alhambra’s population is either very low income (25.4%), low income (15.4%), or moderate income (16.6%). The numbers are nearly identical for the City of Pasadena.

      60% of Alhambra households are renters, compared to Los Angeles (48%), Pasadena (56%), Monterey Park (46%), and San Gabriel (55%).

      58% of Alhambra households spend more than 30% of their monthly incomes on rent. 28% of Alhambrans spend more than 50% of their monthly incomes on rent. The percentages are slightly less in Pasadena.

      More than 144 California towns, cities, and counties have inclusionary housing programs.

      Types of Local Affordable Housing Policies/Ordinances

      The following affordable housing policies can be implemented individually or in combination.

      Required “set-aside” housing:
      All new housing developments of a defined type and/or density must provide a percentage of Affordable Housing units for a defined period. Example: All new housing developments over 10 units must provide a 20% Affordable Housing set-aside for a period of at least 30 years regardless of deed transfer.

      Incentive-based set-aside housing:
      Such ordinances and their incentives will vary.

      • Situation 1: All housing developments receiving a density bonus or a zoning variance shall provide a percentage of Affordable Housing units. Example: for every Market Rate unit built as a result of the density bonus and/or zoning variance, one Affordable Housing unit shall be provided.
      • Situation 2: Any development providing Affordable Housing shall receive a density bonus of one Market Rate unit for each Affordable Housing unit provided.

      In Lieu Affordable Housing unit fee:
      An in lieu fee is a fee that a developer can pay instead of building Affordable Housing. The in lieu fee goes into an Affordable Housing trust fund that a city can then use to acquire land and or property to build Affordable Housing or convert existing structures into Affordable Housing.

      • Pros: In lieu fees are accumulated solely for Affordable Housing. The funds can be utilized to create assisted living housing for the homeless and/or extremely low-income households. An in lieu fee also provides an alternative for developers who do not want to build Affordable Housing (most developers do not want to build Affordable Housing).
      • Cons: An in lieu fee option can be misused and abused. Land is scarce and property is expensive. Political will also varies with the wind.  The money can sit in an account unused for years. Furthermore, unless there are strict parameters for when a developer can opt to use the in lieu fee option (i.e. projects under 10 units and/or density bonus restrictions), a developer typically will choose to pay the fee rather than build Affordable Housing units, which greatly diminishes a city’s Affordable Housing stock in the short and long term.

      If a city does choose to utilize an in lieu fee, it is critical that any ordinance permitting such a fee set strict parameters for use so that it is not so over-utilized by developers that it undermines the ordinance’s intent and purpose of creating Affordable Housing.

      Just Cause Eviction:
      In order for a landlord to evict a tenant, the landlord must show that the underlying cause of the eviction is “just.” In other words, a landlord cannot evict a renter simply to rent the unit to someone else at a higher price. It is important that a “just cause eviction” law clearly defines what constitutes a just cause eviction, such as failure to pay rent or habitual late payment of rent.

      Rent control:
      Rent controls impose limits on the amount a landlord can charge or increase rent. Rent control laws vary widely, but most rent control laws tie the percentage a landlord can increase rent annually to the rate of inflation.  Example: Santa Monica allows landlords of rent controlled units to annually increase rents equal to seventy five percent of the percentage increase in the Consumer Price Index.

      Currently, California law (the Costa-Hawkins Rental Housing Act) prevents California cities from imposing rent control on single-family dwelling units, condominiums, and apartment units constructed after 1995.  It also prevents cities from imposing “vacancy control.” In other words, if a tenant leaves a rent-controlled unit, the landlord can increase the rent to Market Rate.

      Anti-Rent Gouging:
      Similar to rent control, but with more landlord wiggle room, anti-rent gouging laws prohibit rents from rising above an annually determined ceiling. Whereas rent control typically dictates that rents can rise as much as inflation or a small percentage above inflation, anti-rent gouging laws allow for a wider margin of increase so long as the hike does not surpass the increment ceiling. The result is protection against flagrant rent hikes. Example: the state of Oregon restricts annual rent increases to 7% plus the increase in the consumer price index.

      Establish Affordable Housing Criteria:
      It is important that Affordable Housing ordinances have criteria that prevent segregation and discrimination. For example: 1) Affordable housing units should not be segregated from Market Rate units in the same development, 2) the exterior of Affordable Housing units should not differ from the exterior of Market Rate units in the same development, 3)  any Affordable Housing units within  a larger multi-phase development should not be built last, 4) the number of bedrooms in Affordable Housing units should vary to accommodate families, and 5) Affordable Housing units should not impose age restrictions.

      Creation of an Affordable Housing department/division and/or commission:
      In order for a city to successfully implement and monitor compliance with an Affordable Housing ordinance, entities must be employed to oversee and promote application of the ordinance.

      Seek out Affordable Housing developers:
      City governments can actively seek out, lobby, and incentivize Affordable Housing developers and nonprofits to build in their cities. Cultivating good relationships with Affordable Housing developers and their partners is key to a sustainable Affordable Housing program. Creating an Affordable Housing division in City government will greatly aid this effort.

      Some Cities in the Region with Affordable Housing Policies/Ordinances

      Pasadena
      Pasadena has an Affordable Housing ordinance that includes Inclusionary Housing and Regulations and an In-Lieu Fee option that also allows for the donation of land. The ordinance applies to residential and mixed-use projects of 10 or more units, and it requires 15% of newly constructed housing units be set aside as Affordable Housing units. Pasadena also has a Department of Housing that is tasked with Affordable Housing duties.

      Glendale
      Glendale recently adopted a City-wide inclusionary housing ordinance. The ordinance requires a 15% Affordable Housing set-aside for all new rental developments with five or more housing units. The units must be maintained as Affordable Housing for a period of 55 years. The ordinance also offers an in lieu fee option that increases with the size of the development. Developers are allowed to build the set-aside units at a different location than the project proposed or convert units from a pre-existing development if they wish. The ordinance requires exact compatibility between Affordable Housing units and Market Rate units.

      Santa Monica
      The City of Santa Monica’s inclusionary housing ordinance requires that not less than 30% of all multifamily-residential housing newly constructed in the City on an annual basis be permanently affordable to and occupied by low and moderate income households. Santa Monica’s ordinance further mandates that at least 50% of the newly constructed units required to be permanently affordable be occupied by and affordable to low income households.

      Santa Monica also has Rent Control.

      [This article has been updated to add Anti-Rent Gouging section on July 3, 2019, 3:57 pm.]


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      Contributor

      Comments

      1. Bob G says:

        What you are forgetting is that our government has increased the cost of construction to such a high level that building housing for the average man is unaffordable!

        The list of higher costs:

        1) Cities reduced zoning about 20 years ago by 75%. Meaning each piece of land can only hold 25% of the units it could of. This created a scarcity of land for apartments and land prices doubled. $75,000 more a unit cost.

        2) the State of California required that all new construction keep all of the roof water on the property. This is like building a quarter concrete garage parking space for each unit. Cost $12,000 per unit.

        3) open space requirements or more recitation area on properties. This was also done to reduce apartment buildings density. Cost $15,000 per unit.

        4) California’s energy savings title 24 for lighting. 3 year old revision of law. Cost $25 per sqft or about $20,000 per unit.

        5) new california requirement of zero energy footprint. Cost $25,000 more per unit.

        6) permit fees increasing to $10 per foot. Cost $3,500 per unit.

        7) Street dedication, new traffic lights , new sidewalks, new trees, and more.$20,000 per unit.

        8) laws like JJJ in Los Angeles requiring only union labor to build buildings. 40% more cost. $160,000 per unit.

        9) Federal law passed by Ronald Reagan changing the way an owner can depreciate an apartment building. It’s not a cost, it’s a crime! People bought buildings just for the tax savings. Sounds bad right, however it created a huge surplus of apartment buildings in the 1970s and rents dropped like crazy. Reagan thought apartment buildings did not add new jobs and we all know Republicans only are about employer not workers so why incentivise people to build reasonably priced apartments!

        You can blame the dems for the first 8 issues and the Republicans f ou r the last issue.

        No one cares about the people politicians just want reelection!

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