IN DEPTH LOOK
Pasadena is considering expanding its Inclusionary Housing Ordinance (IHO). Changes are responsive to housing advocates and Pasadena’s need for affordable housing.
By Sean McMorris
Pasadena’s Planning Commission recently recommended that the City Council implement the following reforms:
- Increase the percentage of set-aside affordable housing from 15% to 20% for all projects with 10 or more units; advocates are seeking a threshold of 8 or more units and an affordable unit or fee for developments of 3-7 units,
- Raise the fee that developers can pay instead of including affordable units (in-lieu fee); these fees produced $26 million that were leveraged to produce and/or preserve another 690 affordable units, many for those once homeless,
- Eliminate trade-downs that allow developers to build fewer affordable units if they substitute Low and Moderate Income housing with Very Low Income housing,
- Create an Affordable Housing Concession Menu for developers that would provide them with automatic incentives to build affordable housing (i.e. faster approvals, fewer parking requirements and small density bonuses), and
- Provide a percentage of the affordable units for Very Low Income households.
The Pasadena Planning Commission Recommendations: a Community in Action
The Pasadena Planning Commission recommendations did not just happen; they are a win for affordable housing advocates and the result of a collaborative effort by the Commission, housing advocates and developers.
Jill Shook, Pasadena resident and author of Making Housing Happen: Faith Based Affordable Housing, mobilized a coalition of residents, housing experts, scholars, engineers, faith-based organizations and nonprofits in early 2018 when she learned that Pasadena would be reviewing its IHO in response to the goals within its Housing Element (HE). The HE is required by all CA cities. This 4 to 8-year Element allows cities to plan housing for all income levels. Pasadena’s HE will be updated in 2020.
Shook was part of a team that was instrumental in getting Pasadena’s current IHO passed in 2001; since then the IHO has produced 577 affordable housing units. She spoke with Colorado Boulevevard.net about the proposed revisions and the process undertaken by her and her coalition to advocate for those revisions.
“It’s all about balancing—finding that sweet spot where affordability and profitability can co-exist,” Shook told me over the phone. One does that, according to Shook, by doing a lot of research and analysis to determine what would be feasible and by reaching out to developers to determine what kinds of incentives they would be keen to utilize. Shook is quick to point out, however, that civic engagement and community activism are crucial. “This is incredibly complicated stuff,” Shook said. “You can’t just do research and assume that people are going to read it and then act rationally. Most decisions that are made are more emotional.”
“You can’t ever separate organizing from policy research. You have to know the area and look at who the leaders are in the community,” says Shook, who gives a lot of credit to the faith-based community who has been behind her and her coalition from the beginning. “When city council members see some of these well-known [religious] figures show up and speak about the need for affordable housing, I think that gives them courage to support some of these affordable housing policies.” Shook sometimes talks about the concept of required affordable housing in terms of a biblical tithe, or gleaning, which helps to put the set-aside percentage into perspective for some and drive home the point that societies have an obligation to care for those who are struggling.
It all comes back to community buy-in, according to Shook. “The policy-makers are going to be more comfortable approving these kinds of reforms if they see the community showing up and advocating for them.”
Shook and her Greater Pasadena Affordable Housing Group (GPAHG), under the nonprofit Making Housing and Community Happen, did a great deal of research and analysis before they activated the community. Shook’s team consists of authors, a city planner, a JPL engineer, an ordained minister, several USC grads and representatives of churches. They looked at affordable housing policies all over the country then submitted proposals to the City in time to have them included in the City’s feasibility study, which was conducted by AECOM, a global consulting firm.
When AECOM’s study was completed, Jill and her team poured over all 81 pages of it. They found that the study’s authors recommended that the City not change its 15% inclusionary housing requirement, notwithstanding the fact that their own research and methodology supported a 20% inclusionary housing set-aside. “We realized that AECOM’s conclusions didn’t really match their research,” Shook said. Shook and her team went back to work. Phil Burns, a team member with The Arroyo Group which is a planning and urban design firm with multiple projects in Pasadena (Old Pasadena, the Civic Center and the Playhouse District), demonstrated that, “Using [AECOM’s] same exact research, 20% is very feasible—and it’s even feasible without taking any density bonuses. It can be done with a little less parking and shoring up the [approval] time.” Burns also noted that a 25% set-aside is even doable with a few more concessions, including small density bonuses. Larger density bonuses have become controversial.
The GPAHG team submitted its findings to the City, and these findings were confirmed in an updated AECOM feasibility study provided to Commissioners before the July 24, 2019 Planning Commission meeting. The Arroyo Group and others submitted a letter supporting the GPAHG’s inclusionary findings. There were no public letters of opposition to Pasadena’s IHO or potential modifications.
The Heart of the Controversy and a Proposed Solution
At the heart of the debate is the compatibility of state law and project requirements with Pasadena’s general plan and zoning policies. Specifically, the public and policy-makers oppose higher buildings that sometimes occur as a result of developers receiving entitlement bonuses for including affordable housing in their projects. For example, the Pasadena City Council recently denied approval of a high-density housing project that would have allowed the developer a density bonus that would have significantly increased the height and overall environmental footprint of the project in exchange for a minimal number of affordable housing units. The developer is now considering a lawsuit over the decision.
“Our city staff has been given a rather impossible task,” says Shook. “There is opposition to taller buildings in the City, but how do you get developers to build more affordable housing without seeking entitlement bonuses that could greatly increase the height of a project?”
State law entitles developers to a density bonus (and potentially other incentives) based on the type and amount of affordable set-aside they provide in a project. For example, a housing project that provides at least 5% Very Low Income set-aside is automatically entitled to a 20% density bonus. Under the State Density Bonus Law (California Government Code Sections 65915 – 65918), a developer can receive a density bonus of up to 35% if it provides enough affordable housing.
A California city cannot ignore the State Density Bonus Law (SDBL). However, municipalities can make the SDBL entitlement process lengthy and difficult for the developer and even challenge the developer’s right to certain incentives and concessions in the law—all of which costs the developer precious time and money. A lengthy entitlement process also increases the likelihood of community blowback that comes with any large project. No developer wants a bad image. All developers want community support for their projects.
But here’s the thing: a developer does not have to utilize the SDBL even if it qualifies for the incentives in the law and, surprisingly, some do not. The automatic reduction in Residential Impact Fees that developers receive for building affordable housing in Pasadena (anywhere from tens of thousands of dollars to hundreds of thousands of dollars depending on the size of the project) is enough incentive for some developers. They simply do not want to engage in what could be a long and costly entitlement process if bonuses are sought through the SDBL.
Given these realities, City staff presented the idea of a local incentive menu that developers can use as an alternative to density bonus incentives through the SDBL. The bonuses on this local menu would be by-right if a developer chooses to build more than the base affordable housing set-aside mandated in Pasadena’s IHO. City staff estimates use of the local menu would speed up the entitlement process by 6 to 12 months, saving the developer not only time but a significant amount of money. Shook and the Planning Commission believe the time saved, along with the attractive incentives on the local menu, are big enough carrots for developers to choose the concessions Pasadena offers over the concessions developers can seek through the SDBL.
Analysis suggests that Pasadena’s incentive menu will encourage developers to do two things: 1) accept cost-recovery incentives and concessions that are less disruptive to Pasadena’s zoning laws than those available through the SDBL and 2) build more affordable housing beyond the current (15%) or proposed (20%) base requirement.
In addition, the Planning Commission and City staff are recommending that trade-downs be eliminated from Pasadena’s IHO because they result in less net affordable housing and larger density bonuses.
Developers still can choose to seek incentives and concessions through the SDBL, but they do so at the risk of increased time, money, and scrutiny.
Getting the In-Lieu Fee Right
City staff and the Pasadena Planning Commission are recommending that the IHO’s in-lieu fee be raised to roughly four times the current amount in most parts of the city. According to a city-commissioned study, raising the in-lieu fee would do two things: 1) encourage developers to build onsite rather than pay the fee and 2) ensure that sufficient funds are generated by the fee to allow Pasadena’s Housing Department to create more affordable housing, often extremely low Income housing, which Pasadena’s IHO does not mandate.
According to Shook, since 2001, the City has been able to produce or preserve over 690 affordable units with the roughly $26 million Pasadena has acquired from in-lieu fees—that’s on top of the 577 affordable units that have been built in Pasadena because of its Inclusionary Housing Ordinance.
When asked how the City determines what is an appropriate in-lieu fee—one that is not so low that all developers pay it rather than include affordable units in their projects, but not so high that no developer pays—Shook reiterated, “it’s all about finding that sweet spot.” Finding the sweet spot requires research, analysis and developer outreach. The City needs the in-lieu fee to ensure Pasadena has a diverse affordable housing stock, but it is also preferable that developers include affordable housing in their projects rather than the City attempting to create that stock with seed money from the in-lieu fee trust fund.
Shook and the Planning Commission believe that a higher in-lieu fee will result in more affordable housing and a greater variety of housing stock in Pasadena.
Do IHOs Work?
For Shook, the proof is in the pudding. She points to Santa Monica and West Hollywood, two cities with robust IHOs, very high land costs, and rent control. Nonetheless, housing development is flourishing in these cities; opponents of IHOs and rent control often claim, of course, that building will diminish or cease if such policies are implemented. What is more, Santa Monica and Pasadena are 2 of only 13 cities in L.A. County to have met their 4th Cycle (2005-2013) RHNA allocation goals, while Santa Monica was 1 of only 5 cities in the County to surpass its Very-Low Income RHNA housing goals during the same period (see PDF pages 49 and 51-51 of linked study). In addition, Santa Monica and West Hollywood are 2 of 28 cities and counties in the State to be exempt from SB 35’s mandated streamlining housing entitlement process because they have met their prorated Lower (Very-Low and Low) and Above-Moderate Income 5th Cycle (10/31/2013—10/31/2021) RHNA goals.
Next Step, City Council
Just because the Pasadena Planning Commission and City staff have recommended these changes does not mean they will become law. They have to pass muster with the City Council. The Planning Commission’s recommendations will likely come before the City Council for a vote in the coming weeks.
In the meantime, Shook and her coalition plan to keep advocating for passage of the reforms, meeting with city councilmembers, community leaders and other organizations and with residents who support affordable housing and homelessness prevention.
Shook left me with this: “There is a scripture that talks about being as wise as serpents and as gentle as doves. Being wise as serpents is the truth aspect—researching and organizing. Being gentle in conveying that truth in a manner that is convincing and appealing is where the dove comes in. Balancing the two is important.”
If the Pasadena City Council does implement the Planning Commission’s recommendations, Pasadena would set a high bar for surrounding cities looking for ways to address the worst housing crisis in a generation.
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