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Santa Monica Falls Short of Affordable Housing Mandate  


By Jorge Casuso

June 12, 2012 -- Santa Monica fell far short of its affordable housing quota last fiscal year, but enough developments are currently in the pipeline to exceed the quota when they are completed, according to a report released Friday.

The report, from Andy Agle, the City's director of Housing and Economic Development to the City council, indicates that six affordable multifamily developments totaling 134 residences were completed in Santa Monica during Fiscal Year 2010/11.

That represents 6 percent of the total multifamily residential developments built during the fiscal year ending June 30, 2011. Prop R, a 1990 law approved by Santa Monica voters in 1990, requires that 30 percent of all multifamily housing completed each fiscal year be affordable.

"Due to fluctuations in multifamily development schedules, Santa Monica did not meet the Proposition R requirement," according to the report prepared by City Administrative Analyst Lori Khajadourian.

"However," she added, "when considering all residences in the development pipeline (including those completed, in construction and with planning approvals), 40 percent of the residences are affordable."

Of the six affordable developments completed last fiscal year, four chose to provide affordable housing units onsite or offsite, while two paid a total of $239,510 in affordable housing fees in lieu of building the units, according to the report. The funds are used to subsidize affordable housing projects by nonprofit developers.

Market forces in large part dictate the production of affordable housing, with most for-profit developers choosing to pay an in-lieu fee, unless they have a Development Agreement with the City, in which case they are generally required to build the units as part of the development.

Under the City’s Affordable Housing Production Program (AHPP), developers who do not pay an in-lieu fee must rent between 20 and 25 percent of their new units to low-income tenants, or, if they are condos, sell between 20 and 25 percent to moderate-income buyers. The percentage depends on the size of the development.

Under the law, they also can elect to build between 10 and 12.5 percent of units for "very low income" tenants.

Low-income is defined as “at or below 60 percent of area median income” and moderate income is defined as “at or below 100 percent of area median income,” according to the report.

For-profit developers will play an increasingly prominent role in providing affordable housing after the demise of Redevelopment Agencies (RDAs) across the state.

According to the Housing Needs Study Session presented to the council in February, the City will have to rely more on hotel and commercial developers to finance affordable housing projects that would have been purchased or built under a five-year plan with about $111 million in RDA funds.

Although the City failed to meet its affordable housing quote last year, staff is not recommending that the council take action, as they did last year after only 11 percent of the multifamily units built were affordable.

In June 2010, the council amended the provisions of the law to "require developers to complete off-site affordable housing concurrently with the market-rate project," according to the report

"Since the total number of affordable residences relative to market-rate residences in the development pipeline exceeds the Proposition R requirement, staff does not recommend additional changes to the AHPP at this time," Khajadourian wrote.

According to the report, building permits remained active for 797 residences in 35 new multifamily developments.

"If all of these developments are completed during a single reporting period, then 52 percent will be affordable," the report stated. "However, due to varying construction periods, it is not possible to predict how many of these developments will actually be completed in any given year."

Six multifamily developments with a total of 250 units received planning approvals during the last fiscal year, according to staff. Of these, 5 units will be affordable to those with moderate incomes, 49 to those with low incomes and 1 to a very low-income tenant.

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