SR-400-008-01 (4)
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HAMILTON, RABIKOVITZ & ALSCHULER, l:-1c.
Policy, FiTJancial & Management C01IjultaTJt,.
MEMORANDUM FOR: Robert Moncrief, Housing Manager
MEMORANDUM FROM, ~. Silvom
SUBJECT: Characteristics of Recent Condominium Projects
DATE: December 7, 1999
This memorandum summarizes the characteristics ono new condominium projects
submitted to the City of Santa Monica ("City") for land use entitlement approvals, between March
1, 1998 and April 30, 1999, a period that includes final approval of the Affordable Housing
Production Program. I The number of applications was a surprise to City staff and decision
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and impacts on the neighborhoods in which they would be constructed. On May 25, 1999, the
City Council adopted Interim Emergency Ordinance 1944, which established a 45-day
moratorium on multi-family development in the City's multi-family residential zoning districts, to
enable the City to assess the impacts of new development and other related housing issues. The
moratorium was subsequently extended for nine additional months.
The analysis reported here explores the degree to which the 30 new projects differ in any
significant ways from condominium projects proposed in past years, and the motivations
underlying the developers' decision to apply for permits at this time. Following a summary of
our findings and conclusions, the memorandum presents (beginning at page 4) the physical and
operational characteristics ofthe 30 recent projects, and compares them with past patterns of
condorruruum development, based on HR&A analyses prepared for the City's Housing Element
Update2 and its Affordable Housing Production Program.3 We then report (beginning at page 17)
the results of telephone interviews with nearly all of the new project developers regarding their
motivations for proposing their projects, including the relative importance of changed market
Santa Monica Municipal Code (SMMC), Chapter 9.56, commencing with ~ 9.56.00.
2 City of Santa Monica, 1998-2003 Housing Element Update, 1998, including a Technical Appendix
containing 10 HR&A memoranda and reports, whose subjects include assessments oftlle City's Conditional Use
Permit process for new condominiums, and its previous Inclusionary Housing Program (Ordinance 1615), as
potential or actual "constraints" on the development of new housing in the City. (Hereinafter, "Housing Element
Update").
3 HR&A, Inc., "Revised lnclusionary Housing Program for the City of Santa Monica," a memorandum
report, dated April 6, 1998. (Hereinafter, "Revised Inclusionary Housing Program Memo"); and HR&A, Inc., The
Nexus Between New Market Rate Multi-Family Developments in the City of Santa }v!onica and the Needfor
Affordable Housing, July 7, 1999. (Hereinafter "Nexus Study").
1990 SOl;TH BCXDY DRIVE, SerrE 777, Los AXGELES, CALIFORXIA 90025. TEL: 3IC.820.3444 . FAX: 31C.820.6778
NfW YORK
Los ANGELES
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Characteristics of Recent
Condominium Projects
circumstances and recent changes in City development regulations, including fee option in the
Affordable Housing Production Program.4
In a separate memorandum we analyze the financial feasibility implications of the changes
in market conditions, as reflected by these projects, for the nexus calculations underlying the
Affordable Housing Production Program's fee option.
4 SMM:C ~ 9.56.070.
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Characteristics of Recent
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I. OVERVIEW AND SUMMARY OF RECENT CONDOMINIUM PROJECTS
Thirty new condominium projects, with 176 units, were submitted to the City of Santa
Monica for land use entitlements between May 1, 1998 and April 30, 1999. The following is a
summary of their characteristics, and comparisons with condominium developments during the
past decade.
· The number of condominium projects, and proposed units, is large by
comparison with most of the 1990s, but is not unprecedented in Santa Monica's
recent history. The number of projects is significantly higher than in most ofthe
years of the 1990s, a period that included a severe economic recession and
numerous changes in City development regulations. But, the volume falls short of
the number of applications filed during the last real estate market peak of 1989-
1990, when over half the total number of condominium project applications in the
past 10 years were filed. The 30 new projects are about two-thirds of the number
proposed in 1989, and one-third of the 1990 total.
· The overall scale and inten.~ity of the new projects is similar, in most respects,
to past condominium projects, but they are more heavily concentrated north of
Wilshire Boulevard and have somewhat larger average unit sizes. Most of the
new projects are relatively small, as in the recent past. They are primarily one-lot
developments on sites zoned for low-density multi-family development, and all
have 12 or fewer units each; about three-quarters have five or fewer units. A
much larger proportion of the newer projects than in the recent past, however, are
planned for sites north of Wilshire Boulevard (63%), and fewer (10%) will be
located south of Pi co Boulevard. One-lot projects with two-bedroom units, the
dominant project type, are slightly larger (by 237 square feet, or 3%), on average,
than in the recent past, and the average size of the two-bedroom units is larger (by
222 square feet, or 16%).
· The new condominium projects will replace rental units to a greater degree
than in the recent past. Two-thirds of the new project sites contain, or previously
contained, rental units, and the other one-third were vacant or featured single-
family homes. This is a reversal in the relative proportions of prior uses, compared
with the recent past. It reflects further depletion of the supply of vacant and
single-family sites in multi-family zones, as well as changes in regulatory
procedures, including changes influenced by court decisions, that make it easier to
remove controlled rental units under the Ellis Act today.
· The new condominium projects represent a net increase of dwelling units in the
City's housing stock, but a reduction in the number of units that rent at prices
affordable to lower-income households. Overall, the 176 new condominium
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units will replace 109 existing, or previously existing, dwelling units, for a net
increase of 67 units. Ninety-one ofthe previous units had restricted rents under
the City's Rent Control Law. About two-thirds (62, or 68%) of these units rented
at prices that today would be "affordable" to lower-income households, based on
City definitions that include rent and number of bedrooms per unit.
· The new condominiums will produce about $2.1 million in Affordable Housing
Fee revenue, which can support development of 14-16 new units affordable to
lower-income households. If all 30 projects eventually pay the new Affordable
Housing Fee of $7.31 per square foot, as elections to do so stated in 21 of the
project applications suggest, the fee proceeds will support development of 14 units
affordable to a low-income household, or 16 units affordable to a very low-income
household, at the City's average per-unit subsidy rate.
· City land use entitlement processing outcomes for these projects are similar to
past trends, but hearing body decision time lines are faster. All of the new
condominium projects that reached the Planning Commission or City Council prior
to the moratorium were approved with conditions, and most were exempt from the
California Environmental Quality Act, due to their small number of units. It now
takes less time to obtain discretionary decisions, from the date an application is
accepted for processing, compared with the recent past.
· Changes in market conditions-ie., the ability to sell units for a higher price-is
the primary reason applicants initiated the new condominium projects, not
changes in City regulations. Structured telephone interviews with the sponsors
of nearly all of the 30 new condominium projects indicate that improved market
conditions is the primary motivation for seeking City approvals of their projects at
this time. Only one applicant mentioned the new Affordable Housing Fee, and
only as a secondary factor. This case involved a project approved six years ago
with a higher affordable housing fee requirement.
· The new projects are projecting higher sales prices than in past years, but they
are paying more for land and construction costs. Interviews with proj ect
applicants indicate that although sales prices have risen over the past few years, so
have land costs and construction costs. The feasibility implications of these
changes, and what they imply for the City's Affordable Housing Fee, are addressed
in a separate HR&A memorandum.
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n. CHARACTERISTICS OF THE NEW PROJECTS AND COMPARISONS WITH
PAST TRENDS
The following sections present the characteristics of the 30 condominium projects filed
between May 1, 1998 and April 30, 1999, based on a detailed review of the City's application
files.5 Where possible, the analysis also presents comparisons between these projects and new
condominium project applications filed between 1989 and 1995, or in some cases, between 1989
and 1997. The historical patterns used for comparison are those contained in analysis prepared by
HR&A for the Housing Element Update.
A. Number of Projects Proposed
The number of condominium projects, and proposed units, is large by comparison with
most of the 1990s, but is not unprecedented in Santa Monica's recent history. As shown in Table
1, 1998 was the first year in nearly a decade that more than 10 new condominium projects have
been proposed in a single year. On the other hand, the 32 new condominium projects filed in all
of 1998 and 1999, through April 30/ fall far short of the numbers proposed during the last real
estate market peak of 1989-1990. The applications filed in just those two years account for over
half(61%) the total projects and units (58%) proposed in the past decade. The number of project
applications in 1998 is about two-thirds of the 1989 total, and about one-third of the 1990 total.
The pace of 1999 applications, as of the end of April, indicates that the number of projects and
units filed in 1999, on an annualized basis, would have been a little larger than 1998 (i.e., about 27
projects and 156 units), if not for the moratorium, but of similar magnitude compared with the
1989-1990 peak.
5 A copy oithe application audit protocol used by HR&A to extract information about each project from
City files is included as Appendix A.
6 For purposes of describing the relative volume of applications, we included one additional project (957
191h Street) filed in 1998, but prior to the May I cut-off date used in other analyses presented in this memo, and
another project filed during the analysis period (1513 91h Street), but whose application file was unavailable for
analysis. Tn most other cases, the analysis focuses on 30 new projects.
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Table 1
Number of Condominium Project Applications in Santa Monica, 1989-1999
Application Number of Projects Number of Units
Year
Number Percent Number Percent
1989 33 20.1% 190 19.6%
1990 67 40.9% 370 38.3%
1991 12 7.3% 75 7.8%
1992 8 4.9% 63 6.5%
1993 6 3.7% 59 6.1%
1994 0 0.0% 0 0.0%
1995 3 1.8% 10 1.0%
1996 2 1.2% 10 1.0%
1997 1 0.6% 5 0.5%
1998" 23 14.0% 133 13.8%
1999b ~ 5.5% ..Ql 5.4%
Total 164 100.0% 967 100.0%
" Includes one project filed in February 1998.
b Through April 30. 1999. including one project which is not analyzed in
subsequent sections.
Source: Planning & Community Development Dept.; HR&A
B. Project Location
The locations of the 30 projects proposed between May 1, 1998 and Apri130, 1999, are
illustrated in Figure 1, on the following page. Nearly two-thirds (19, or 63%) are located north
of Wilshire Boulevard, with about one-quarter (eight, or 27%) located in the central part of the
City, including downtown, and the remainder (three, or 10%) are in Ocean Park. As Table 2
indicates, the concentration ofrecent projects in the northern part of the City is a departure from
the trend during the earlier years ofthe past decade, when the distribution was more
geographically even, north to south. The central part of the City (i.e., downtown and the Mid-
City area) received a somewhat smaller share of the new condominium activity than was the case
previously, and the proportion of more recent projects in the Ocean Park area is significantly
lower than in the rest of the 1990s.
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Characteristics of Recent
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Table 2
locations of Condominium Project Applications
in the City of Santa Monica, 1989-1999
Number of Projects Number of Units
Area of the City
Number Perce nt Number Percent
1989- 1997
North of Wilshire 48 36.4% 288 36.8%
Downtown/Mid-City 50 37.9% 285 36.4%
South of Pico 34 25.8% 209 26.7%
Total 132 100.0% 782 100.0%
1998-1999'
North of Wilshire 20 62.5% 115 62.2%
Downtown/Mid-City 9 28.1% 62 33.5%
South of Pi co ...l. 9.4% ....1!. 4.3%
Total 32 100.0% 185 100.0%
'Through April 30, 1999. Includes two additional projects per footnotes to
Table 1.
Source: Planning & Community Development Dept.; HR&A
C. Zoning Districts
As in the recent past, the low-density, multi-family districts (i.e., R2, R2-NW and OP-2)
predominate among the recent projects, accounting for the locations of over three-quarters of all
projects (23, or 77%). These districts permit two-story buildings, between 28 and 30 feet in
height. The medium density districts (R3,R3-NW and R3-R) account for the remaining one-
quarter of the new projects (7, or 23%). Five of these projects are three-stories, up to 40 feet in
height, while the other two are two-story projects.
Table 3 compares the distribution of projects by zoning district with 32 randomly selected
and representative condominium projects filed between 1989 and 1995, that were analyzed in the
Housing Element Update. It shows little change in the relative distribution of projects as between
low-density and medium-density districts. Among the low-density districts, however, the recent
projects show a higher representation ofR2-NW District sites, consistent with the concentration
ofthese projects north of Wilshire Boulevard, where that zoning district is located.
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Table 3
Zoning Districts for Condominium Project Applications
in the City of Santa Monica, 1989-1999
32 Representative 1998-1999 Projects'
Area of the City 1989-1995 Projects
Number Percent Number Percent
Zoning District
R2 21 65.6% 13 43.3%
OP-2 2 6.3% 3 10.0%
R2-NW -1 3.1% .2 23.3%
Subtotal Low Density 24 75.0% 23 76.6%
R3 6 18.8% 3 10.0%
R3-NW 1 3.1% 3 10.0%
R3-R Q 0.0% 1 3.3%
Subtotal Medium Density 7 21.9% 7 23.3%
R4 (High Density) 3.1% 0 0.0%
Total 32 100.0% 30 100.0%
1 Through April 30, 1999.
Source: Housing Element Update; HR&A
D. Project Size
1. Lot Sizes
All 30 of the recent condominium applications are for projects with 12 or fewer units,
consistent with past trends favoring relatively small projects on one or two lots. The eight largest
new projects (i.e., 9-12 units) are on sites exceeding 10,000 square feet in size, mostly two lots.
One project with five units is on an over-sized 10,000 square foot site, and the other 21 projects
are single-lot developments of three to six units each. Table 4 compares the site area
characteristics of the recent projects with 32 representative condominium projects filed between
1989 and 1995. It shows that the more recent projects tend to feature larger lots (i.e., at least one
standard City lot of7,500 s.f.) than during past years. This is consistent with the change in the
geographic distribution of the more recent projects, with many fewer in the southern parts of the
City, where substandard size lots are more prevalent.
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Table 4
Project Site Area for Condominium Project Applications
in the City of Santa Monica. 1989-1999
32 Representative 1998-1999 Projects 1
Site Area 1989-1995 Projects
(square feet)
Number Percent Number Percent
5,000-6,000 9 28.1% 1 3.3%
6,001-7,000 2 6.3% 4 13.3%
7,001 -8,000 12 37.5% 16 53.3%
8,000+ 6 18.8% 9 30.0%
Unknown ..1 9.4% ...Q 0.0%
Total 32 100.0% 30 100.0%
1 Through April 30, 1999.
Source: Housing Element Update; HR&A
2. Total Proiect Floor Area
Total project size, as measured in floor area, varies with the number of units and unit sizes
in the project. Among the 23 one-lot projects, which include between two and six units each, the
average project size is 7,780 square feet. Five, two-lot, two-story projects average 15,249 square
feet, and two, two-lot, three-story projects average 25,133 square feet. Table 5 summarizes these
project size patterns.
Among the 15 one-lot, all two-bedroom unit projects, which account for half of the 30
new projects, the average total project floor area is 7,832 square feet. All but one of these
projects includes loft area, ranging from 385 square feet to 1,424 square feet, or between 5.1
percent and 14.4 percent of total floor area. Lofts account for 10 percent or more of total floor
area in about half ofthe all-two-bedroom projects. The average total floor in these newer
projects exceeds, by 237 square feet, or 3.1 percent, the average assumed for such projects in
HR&A's "constraints" analysis7 and in the analysis underlying the recommended amount of the
Affordable Housing Fee. The implications of this difference for the "constraints" analysis and the
fee are addressed in HR&A's companion memorandum.
7 This analysis for the Housing Element Update established the level offcc that could be charged a new
apartment or condominium project to offset its impact on affordable housing, without causing the return on
investment to drop below levels that are unacceptable in the development industry. See, Revised Inelusionary
Housing Memo.
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Table 5
Total Project Floor Area in
30 Condominium Project Applications
in the City ot Santa Monica. 1998-1999
Projects by Scale Average Project Percent ot
Floor Area (s.t.) All Projects
1-Lot Projects, 2-BRs Only 7.787 50.0%
1-Lot Projects, 3-BRs Only 8.214 13.3%
1 -Lot Projects, Mixed BRs 7.480 13.3%
1 -Lot Projects, All 7.780 76.7%
2-Lot, Low-Density 15,249 16.7%
2-Lot, Medium-Density 25,133 6.7%
All Projects 100.0%
1-Lot Projects, 2-BRs Only Average Project Median Project
(15 projects) Floor Area (s.t.) Floor Area (s.t.)
Avg. Area (non-Loft) 7,087 7,098
Avg. Loft Area 807 692
Average Total Area' 7,787 7.946
1 Averages are calculated separately for each component and for the total.
Therefore, average non-loft area and average loft area do not equal
average total floor area.
Source: HR&A
3. Unit Sizes
Of the 176 proposed new units in the 30 new condominium projects, a large majority (124
units, or 71%) are two-bedroom units, and about one-quarter are three-bedroom units (45, or
26%). The remainder include efficiencies and one-bedroom units (one each), and five, four-
bedroom units. About four in 10 (43%) of the projects consist of two-bedroom units only,
another one in five consist of three-bedroom units only, and the remaining one-third include a
combination of unit sizes.
The average unit size for the two-bedroom units is 1,622 square feet; 2,144 square feet for
the three-bedroom units; and 2,994 square feet for the four-bedroom units. These unit size
relationships are shown in Table 6.
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Table 6
Unit Type and Size Distribution for
30 Condominium Project Applications
in the City of Santa Monica, 1998-1999
Unit Types. All Proiects Number Percent
O-BR 1 0.6%
1-BR 1 0.6%
2-BR 124 70.5%
3-BR 45 25.6%
4-BR -1i 2.8%
Total 176 100.0%
Proiects. by Unit Mix Number Percent
2-BR Only 13 43.3%
3-BR Only 6 20.0%
Mix of Units 11 36.7%
Total 30 100.0%
Averaae Unit Size Averaae Floor Area
O-BR 1,195
1-BR 928
2-BR 1,622
3-BR 2,144
4-BR 2,994
Source: HR&A
The two-bedroom units in the recent projects, which are more characteristic of trends in
the northern part of the City, include more floor area than was assumed in HR&A's financial
modeling work for the Affordable Housing Fee analysis (about 1,400 square feet), conducted in
early 1998, which studied averages across the City. The upward trend in new condominium floor
area on the north side of the City is also evident from data on sales oftwo-bedroom units in
recently built condominium projects. The median size of a two-bedroom unit in condominiums
sold north of Wilshire Boulevard since 1997 is 1,546 square feet.8
D. Prior Use of the Project Site
According to data in the project application files, which was cross-checked with the City's
Rent Control Administration records, all but one ofthe new condominium project sites was
8 Source: HR&A, based on analysis of 1997-1999 monthly closed sales data reported by First American
Rcal Estate Solutions. These data are an attachment to HR&A's companion memorandum.
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previously developed with a dwelling unit. Nine projects contained single-family homes and 20
projects (67%) contained apartment units.
The newer projects represent a higher incidence of redeveloping sites that previously had
rental units on them, than was the case in the recent past. Table 7 shows that for 32
representative condominium projects for which applications were filed during the 1989-1995
period, about one-quarter of the condominium sites had rentals, nearly one in 10 was previously
vacant, and almost half previously contained single-family homes.
Table 7
Previous Uses on Condominium Project Sites
in the City of Santa Monica, 1989-1999
Previous Use 32 Representative 1998-1999 Projects'
of Project Site 1989-1995 Projects
Number Percent Number Percent
Vacant 3 9.4% 1 3.3%
Single-Family Home 15 46.9% 9 30.0%
Apartments 8 25.0% 20 66.7%
Other Uses 4 12.5% 0 0.0%
Unknown .1. 6.3% ..Q 0.0%
Total 32 100.0% 30 100.0%
, Through April 30, 1999.
Source: Planning & Community Development Dept.; Rent Control
Administration; Housing Element Update; HR&A
Altogether, the 176 new condominium units in these 30 projects will replace 107
previously existing dwelling units, for a net housing stock gain of 69 units, or an average of 2.3
additional dwelling units per project. Not all projects represent net increases, however. As
shown in Table 8, there will be a net increase of 87 dwelling units in 22 projects, no change in the
number of units in five projects, and a net loss of 18 dwelling units in three projects.
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Table 8
Net Change in Dwelling Units for 30 Condominium Projects
in the City of Santa Monica. 1998-1999
Change # Projects Units Units Net Average Units
Before After Change Change Per Project
Net Gain 22 49 132 83 3.8
No Change 5 25 25 0 0.0
Net Loss ..]. 35 ~ llID (5.3)
Total 30 109 176 67 2.2
, Through April 30, 1999.
Source: Planning & Community Development Dept.; Rent Control Administration;
Housing Element Update; HR&A
Most of the rental units that will be replaced by the 30 new condominium projects were
under the jurisdiction of the City's Rent Control Law at one time or another, but the degree to
which the rent level in these units was controlled varies with the circumstance of the unit. For
example, parcels with three or fewer units are eligible for rent level exemptions if certain on-site
resident ownership criteria are met. Under more recent changes in State law, vacant units are no
longer subject to controls upon re-rental, provided the unit was voluntarily vacated by the prior
tenant.9 (The new rent must be maintained for the duration of the new tenancy, subject to the rent
Control Board's annual rent adjustment determination.) Further, units may be removed from
jurisdiction of the Rent Control Law through use of procedures allowed under the Ellis Act.tO
Nearly half ofthe 30 new projects (14, or 47%) , involve use of the Ellis Act to remove 61
previously controlled rental units. One additional unit was pending withdrawal at the time the
f1.les were reviewed. Another 29 units in four projects still had regulated rents that were not
involved in Ellis Act withdrawals. Thus, 91 controlled rental units (not including owner-occupied
exemptions) will be replaced as a consequence of 19 new condominium projects, or an average
replacement of 4.8 controlled rental units per project.
9 Costa Hawkins Rental Housing Act, Civil Code ~ 1954.50. Analysis of the implications of this State
law for the City's housing stock is included in the Technical Appendix to the Housing Element Update, a more
recent study by the City's Rent Control Administration, and Section 8 rent level projections prepared by HR&A for
the City's Housing Authority.
10 This State statute (Govt. Code ~7060 et seq.), which was adopted initially in 1986, provides procedures
for landlords to exit the rental business, subject to certain statutory reqnirements and local regulations. The
evolution of the City's Ellis Act procedures is documented in thc Housing Element Update. See, HR&A, Inc.,
"Assessment of the Rent Control Board's Ellis Act Removal Permit Process as a Potential or Actual Governmental
Constraint on the Development of Housing," Housing Element Update, Technical Appendix, Section 4.
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In evaluating this outcome, it should be recalled that the City's Ellis Act withdrawal
procedures have been simplified in recent years, in part as a result of court decisions. Thus, it is
procedurally easier today to remove an apartment building from the City's rent control
regulations, and replace it with a new use, such as condominiums, than it was earlier in the 1990s.
E. Affordable Housing Stock Implications
Maximum Allowable Rent data provided by the City's Rent Control Administration
indicate that about two-thirds of the 91 units (62, or 68%) previously subject to price controls had
rents that would be affordable to very- low- and/or low-income households today, according to
City definitions based on both rent level and unit size. Stated another way, each ofthe 19 new
condominium projects that will remove units that have, or previously had, price controlled rents
will remove, on average, 3.3 units that would be affordable to lower-income households today.
The actual income characteristics of the previous tenant households residing in these units are
unknown. Previous analysis conducted for the Housing Element Update found that although
most tenant households in rent-controlled units had incomes defined as "low" or "moderate,"
about 25 percent were upper-income households. North of Wilshire Boulevard, where most of
the new condominiums are located, the proportion of upper-income households residing in
controlled rental units was higher than the Citywide average (31 %)11
At the time the project application files were reviewed, 21 of the applicants had declared
the method by which the Affordable Housing Production program requirements would be
satisfied, and all 21 elected to pay the fee of $7.13 per square foot. Assuming that all 30 projects
eventually elect the fee option, the fee total will be $2,123,672. Eighteen of the projects will pay
the full fee, at an average of$106,323 per project. The other three projects are proposed on
vacant sites, and are therefore eligible for a 25 percent fee discount. The average fee for these
projects is $69,951. The fee proceeds will help support development of about 14 units affordable
to low-income households, or about 16 units affordable to very- low-income households, at the
average City subsidy rates per unit ($154,916 and $134,822, respectively) that were assumed in
the City's Nexus Study for the fee option.
F. City Processing orLand Use Entitlements
At the time the application files were reviewed, all but two of the applications had been
deemed complete by City staff Over half (53%) of the projects had been approved by the
Planning Commission. Architectural Review Board approval had been granted to over one-third
(37%) of the projects. Four projects (13%) had been approved by the City Council, including
11 HR&A, Inc., "Results of the 1995 Santa Monica Apartment Tenants Survey," Housing Element
Update, Technical Appendix, Section I, pp. 27-30.
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Characteristics of Recent
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two that were appealed from Planning Commission approvals (11 %). None of the projects was
denied by either the Planning Commission or City Council. Only one project had been granted a
Building Permit and was then under construction. None had completed construction and received
a Certificate of Occupancy. These distribution of project approvals is shown in Table 9.
Table 9
Status of City Approvals for 30 Condominium Projects
in the City of Santa Monica, 1998-1999
Category of Rental Unit
1998-1999 Projects'
Number
Percent
Applications Deemed Complete
Planning Commission Approval
Architectural Review Board Approval
City Council Approval
Building Permits
Under Construction
Certificate of Occupancy
28
16
11
4
1
1
o
93.3%
53.3%
36.7%
13.3%
3.3%
3.3%
0.0%
, Through April 30, 1999.
Source: HR&A
Compliance with the California Environmental Quality Act (CEQA) had been determined
for 29 of the 30 projects. Of these, categorical exemptions were issued for 23 projects (77%),
and Negative Declarations were prepared on the other six (20%), all of which had nine or more
units. None of the projects required preparation of an Environmental Impact Report.
Data on processing times was not available from all project files, but some trends are
discemable. The time between application filing and City staff's "deemed complete"
determination was available for about half the projects (53%), and this phase took a median of79
days. Among five projects with time data, the period from "deemed complete" to a decision by
the Planning Commission was a median of34 days, and all but one case was completed in less
than 35 days. The period from Planning Commission to City Council was a median of 146 days,
for another five projects with time data. These trends indicate more time is being taken to deem
an application complete, but once it is, the remaining steps in the process are completed faster
than in the past, as shown in Table 10.
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Characteristics of Recent
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Table 10
Application Processing Times for Condominium Projects
in the City of Santa Monica, 1989-1999
Approval Step
32 Representative
1989-1995 Projects
1998-1999 Projects'
Median # Projects Median # Projects
Days Days
Filed to Deemed Complete 15 26 79 16
Deemed Complete to Planning
Commission Approval 49 24 34 5
Planning Commission to City
Council Approval 223 3 146 5
, Through April 30, 1999.
Source: Housing Element Update; HRM
G. Financial Characteristics of New Projects
Recent land purchase data are available from a third party source12 for almost three-
quarters of the 30 new condominium projects. The median price paid per lot was $630,000, or
$84 per square foot. Land value data are available for 10 projects proposed for low-density
zoning districts that are intended to be developed with two-bedroom units only, which was the
prototype used in HR&A's financial feasibility analyses for the Housing Element Update and the
Affordable Housing Fee analyses. The median land value for these IO projects is $91 per square
foot overall. Among seven of these projects located north of Wilshire, the median is $95 per
square foot, and for two projects in the Mid-City area, the median is $63 per square foot. By
comparison, HR&A's feasibility analyses for the Affordable Housing Fee assumed land costs of
between $40-$75 per square foot.
The City's permit application form requests applicants to disclose the average selling price
for units in the project. Among 16 projects (53%) that included this information, the median sale
price was $475,000, but this includes a range of bedroom sizes. Among those projects proposed
for the City's low-density multi-family Districts, with two-bedroom units, the median estimated
sales price among five projects proposed north of Wilshire Boulevard is $595,000, or $333 per
square foot. Estimated prices for two-bedroom units in the central part of the City ranged from
$375,000 east of downtown (two projects), or $251 per square foot, to $640,000 ($324 per s.f.)
near the Ocean (one project). By comparison, HR&A estimated that two-bedroom units needed
to sell at prices between $215 and $284 per square foot, depending on the City submarket, in
12 Source: First American Real Estate Solutions (formerly REDI-lRW).
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Characteristics of Recent
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order for the project to achieve acceptable levels ofretum on investment. The applicants'
estimated selling prices suggest these thresholds have now been surpassed.
Development cost data and other project financial characteristics were obtained in the
course of in-person interviews with several developers who consented to discuss project finances.
In general, these interviews indicate that construction costs have increased about 15 percent,
financing costs remain about the same (9.5% construction loan), sales prices have increased,
closing costs have decreased (from 8% to 6%), development fees have increased (from 5-7% to
10%) and construction contingencies have decreased (from 10% to 5%), compared with
assumptions used in HR&A financial feasibility analyses for the Affordable Housing Production
Program's fee calculation. The policy implications of these changes are discussed in the
companion HR&A memorandum, which presents sensitivity analyses for the Affordable Housing
Fee calculation.
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Characteristics of Recent
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m. DEVELOPER MOTIV A nONS
In addition to auditing the new condominium application files, HR&A conducted brief
telephone interviews with nearly all of the sponsors of the 30 new condominium projects. The
purpose of the interview was to identity the developers' primary motivations for bringing their
project forward at this time, and to determine which developers might be willing to discuss
project development costs in more detail.
A. The Telephone Survey
During June 1999, HR&A completed lO-minute telephone interviews with applicants who
account for 24, or 80 percent, ofthe 30 projects. Representatives ofthe other six projects
refused to participate, but did not offer a reason. In most cases the respondent was a
representative of the development entity, and in some cases the respondent was the project
architect. In the latter cases, the architect was asked to respond to the questionnaire from his or
her client's perspective.
A copy of the questionnaire used in the interviews is included as Attachment B. It
included introductory questions to verity certain facts about the project (e.g., address, number and
types of units and approval status), questions about previous development experience in Santa
Monica, questions about motivations for proposing the project, and an indication about
willingness to discuss the project's finances in more detail.
The question regarding motivation allowed the respondent to choose from three possible
responses (stronger real estate market; lower cost of construction financing, recent change in City
policies), or to provide another reason. The answer options were rotated from call to call to
guard against any response bias. If a respondent stated that a recent change in City policies was
the primary reason, the respondent was asked to identity which change, including the ability to
pay the Affordable Housing Fee and the amount of the, or a self-identified change, was the most
important reason. Once again, these response options were rotated among the interviews
B. Survey Results
1. Developer Experience
Anecdotal evidence emerged during HR&A's analyses of issues for the Housing Element
Update which indicated that a non-trivial proportion of the condominium projects developed in
Santa Monica were sponsored by applicants with no prior experience developing in the City, and
in some cases, no prior development experience at all. One of the initial interview questions was
intended to explore this situation for the 30 new condominium projects proposed since March 1,
1998.
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Characteristics of Recent
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Most of the 30 new condominium projects are being proposed by separate applicants, but
two applicants account for seven of the projects. The survey results make it clear that most of the
applicants have prior experience developing condominiums, either in Santa Monica or elsewhere.
Representatives of nineteen projects (63% of projects overall) stated that this was not their first
condominium project, though it was the first project in five cases. Ofthe 19 projects whose
developers indicated that they had built other condo projects, most (15) are being proposed by
developers with prior projects in Santa Monica.
2. Primary Motivation for Filing the Application
Nearly all of the respondents (representing 22 of the 30 projects) who answered the
question about their primary motivation for proposing their project now, indicated that the most
important factor was the stronger real estate market (i.e., the ability to sell their units for a higher
price). Two respondents stated that their primary motivation was to provide housing for
themselves and immediate family members. No one indicated that recent changes in City rules
was the prime factor. Among six responses that also included a second most important factor,
lower financing costs was cited four times, followed by City rules changes (one mention) and
other reasons (development for personal use; one mention). The respondent mentioning the rules
change cited the new Affordable Housing Fee amount applicable to a project that was first
proposed in 1993, and subject to a fee that was considered by the applicant to be prohibitive. The
ability to pay a fee at all was mentioned by one respondent, but as less than a first or second
reason.
3. Willingness to Discuss Proiect Financing
Respondents representing half ofthe 30 new condominium projects stated that they were
willing to meet with HR&A to discuss their projects in more detail. Meetings with some of these
applicants, or their architects, were subsequently conducted, including two applicants responsible
for several projects each. The information gleaned from those interviews is discussed in the
companion HR&A memorandum that presents sensitivity analyses on the Affordable Housing Fee
calculation.
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Characteristics of Recent
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APPENDIX A
Condominium Project Application File Audit Protocol
HAMILTON, RWINOVITZ & ALSCHULER, INC.
'-! . ':'
.1. (.. ,...
CITY OF SANTA MONICA
NEW CONSTRUCTION CONDOMlNIWrl PROJECTS,
MAY 1, 1998-APRIL 30,1999
FlLE AUDIT PROTOCOL
1. PROJECT LOCA nON
a. Street Address
b. Zip Code
2. APPLICANT INFORMA nON (fill in all that apply)
a. Applicant
c. Architect
Address
Arch. Address
Telephone
Arch. Telephone
b. Property Owner
d. Attorney
Owner Address
Atty. Address
Owner Telephone
Atty. Telephone
e. City Project File Numbers:
CUP-~ TM-~AA-~ND-~EIR-_
ARB-~ CDP-~ BP- ; CO-
Project Planner:
3. SITE INFORMA nON (fill in all)
a. # of Parcels or Lots
b. Site Area:
s.f. (not including alley)
c. Alley Area included
s.f. d. Total Site Area
s.f (site + alley)
e. Zoning District
f. General Plan Land Use Category
4. PRE-PROJECT USE OF THE SITE (check one; fill in where needed)
a. Vacant Site
b. Single-Family Home _
c. Rental Units d. Other Use (specify)
# units:
#O-BR: ~ #l-BR: ~ #2-BR: ~ #3-BR: _
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5. OTHER DISCRETIONARY APPROVALS REQUIRED (other than Tract Map and
Architectural Review Board) (check all that apply; fill in where.qeeded)
a. Yards/setbacks Variance or Adjustment _ (describe:
b. Bldg. Height Adjustment _ (Describe:
c. Parking Variance _ (Requested # spaces to be reduced
d. Zone Change _ (from what to what?
e. General Plan Amendment _ (from what to what?
f. Other (specify)
)
)
)
)
6. PROPOSED CONDO UNIT MIX AND UNIT SIZES
Number of Bedrooms Number of Units Average Unit Size (sf)
0
I
2
3
4
Total NA
6a. Lofts. Were Loft Areas Included? YES or NO
If YES, how much floor area in lofts:
s.f.
6b. Building Height: # stories: _; Overall Building Height: _ feet
7. PROJECT CHARACfERISTICS THROUGH THE APPROVAL PROCESS (fill in)
Base 1# Uoits Density Bonus Market Rate Affordable Units Total # Parking
Allowed Units for 00- Units Provided 00 Site Units Spaces
Site Affordable
As Originally Proposed
As Approved by Planning
Commission
As Approved by City Council
Per Building Permit
Per Cenificate of Occupancy
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8. APPLICABLE AFFORDABLE HOUSING REGULATION (check one; fill in as needed)
a. Ordinance 1615
b. Ordinance 1918
c. Compliance options selected by applicant (check one and fill in):
In Lieu Fee
(preliminary Fee Calculation: _ gross s.( x _ (fee per gross sf) = $
(Final Fee Calculation: _ gross s.t: x _ (fee per gross sf) = $
(Date Paid: )
_ Affordable Units On-Site (# affordable units on site
; rental or for-sale?
)
_ Affordable Units Off-Site (# affordable units off-site
rental or for-sale? )
: location
_ Other (specify:
)
9. CEQA COMPLIANCE (check one approach; fill in as needed)
a. Exempt Project: _ (YES or NO)
b. Negative Declaration Prepared _ (YES or NO)
If YES, how much time was needed to complete the Negative Declaration? months
If YES, what was the applicant charged for any outside consultant costs to prepare the EIR?
$-
(If YES. attach proposed mitigation measures to the protocol.)
c. Environmental Impact Report (EIR) Prepared _ (YES or NO)
If YES, how much time was needed to complete the EIR? _ months
If YES, what was the applicant charged for outside consultant costs to prepare the EIR? $_
(If YES. attach proposed mitigation measures to the protocol.)
10. STAFF RECOMMENDATIONS
a.
To Planning Commission: _ Approve w/conditions
_ Deny (reasons:
To City Council re: Appeal of Planning Commission Action
_ Approve w/conditions
_ Deny (reasons: )
)
b.
c.
To City Council re: Final Tract Map: _ Approve
_ Deny (reasons:
)
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11. CURRENT APPLICATION STATUS AND OUTCOMES
(circle all that apply) "
Application Deemed Complete by Staff Pending Approved Disapproved
Landmarks Commission - Pending Approved Disapproved
Yes or No
Planning Commission - Pending Approved Disapproved
Consent Calendar or Hearing?
City Council Pending Approved Disapproved
Consent Calendar or Hearing?
Architectura1 Review Board Approval Pending Approved Disapproved
Building Pennit Pending Approved Disapproved
Under Construction Pending Approved Disapproved
Occupied Pending Approved Disapproved
What special issues, if any, were raised in the Planing Staff report to the Planning Commission?
(Briefly describe)
What special issues, ifany, were raised by the Planning Commission? (Briefly describe)
What special issues, if any, were raised by the City Council on appeal or at Final Tract Map
approval? (Briefly describe)
HAMILTON, RABINOVITZ & ALSCHULER, INc.
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12. PROJECT APPLICA nON PROCESSING TIME LINE
(Enter all dates; if no continued hearing by the Planning Commi:>~ion, or no City Council appeal,
enter "none." Enter elapsed time in months.)
Action Date Elapsed Notes
Time
Application Submitted to the Planning
Department 0
Application Deemed Complete by Planning
Department
Planning Commission Final Action
Landmarks Commission Final Action
City Council Final Action
Arch'l Review Board Final Action
Building Permit Issued
Certificate of Occupancy Issued
13. COASTAL DEVELOPMENT PERMIT STATUS (fill in all)
a. Is this Project located in the City's Coastal Zone? _ (YES or NO)
b. If YES:
(1) Date of Architectural Review Board "conceptual approval"
(2) Type of Coastal Commission Action: _ Exempt _ Administrative Approval
_ Full Coastal Development Permit
(3) Application status (circle all that apply and fill in as needed):
Application Filed (date:
)
Application Pending Commission Action
Commission Action: _ approval or _ disapproval (date:
)
lIAMILTON, RABINOVITZ & ALSCHULER, INc.
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Characteristics of Recent
Condominium Projects
APPENDIX B
Condominium Project Applicant Telephone Interview Questionnaire
R<\.MILTON, RABINOVITZ & ALSCHULER, INC.
'. :i" 1-/-' ,y
SaMoNex2 -- Preliminary Interviews With Condo Developers
Heiio, my name is . with i-iR&A~ inc. We're an independeut economic cOfisuliifig firm
that's been working with the City of Santa Monica on housing policies during the past few years.
\1.1........ ......,:...u,;....~. ~........t..".....:...:...... ............:.............. .L....... I........ ............ .......................... ~,.r:....... .J...... ......... "'.....r...... ;............ihl
Y'l,," I... 1.......1"".....".6 ,",UIIUUIIIIIUUIII l,UUJ,,"""";I uta.. lIo.y... U,,",""II pIUt'U~"'U .......UII;; UI'" pl;l,o:I" l....Q,I ,..... ..........,..J
how the new condominium market has changed in the past few years. Because your
condominium project was tiled with the City during the last year, we'd like to ask a few general
questions about why you initiated the project at this time. This is not for quotation and
infonnation you share with us will have no bearing on your City pennits. We're pooling opinion
from about 30 developers and no names will be used. This will only take about 10 minutes.
I. Verify Project
First, i' d iike to confinn that we have the right information about your project:
0.........:........ A~A............
I IUJ...."'.. "'UUI"~~.
Tota! Number of Units:
Unit Mix:
I-BR
2-BR
3-BR
4-BR
[NOTE ANY CORRECTIONS]
2. Verify Project Approval Status
,,____..J=__ &_ ~t.._ ,...,=..u Cl__ u._'.._ ___~_____.J ______ ___!__.. L__ ____~____L
l"\.\,;~uruUlg l.U me L.ILY UH::S we vc n;vu::wCl1. yuur PIUJC"'L 1Iil:i rc~vcu;
1\In 'Plt:lnnino rJ"lo"".,.,iC!C!i^" ^r r:t'l.l r^"n~il .rf_it!1nn
_ . ''''' a .-........0 ............................... "". .......J .................... ................""u
_ Planning Commission approval only
Planning Commission and Architectural Review Board approval
_ Planning Commission. ARB and City Council approval
_ Building Pennit, but not vet under construction
_ Building Pennit Jl!.!l!. under construction
[NOTE ANY CORRECTIONS]
3. Experience Developing in Santa Monica
a. For some of the developers we are speaking with, this is their tirst condominium project ever.
or their first project in Santa Monica. Others are more experienced builders. Where"o you fit
into that picture? Is this your FIRST CONDOMINIUM PROJECT?
Yes
No
IFNO:
_ Other condos in Santa Monica? (Describe:
_ Other condos elsewhere? {Describe where:
b. Do you have experience building apartment buildings?
No
_ Yes, in Santa Monica (Describe where:
_ Yes, but not in Santa Monica (Describe where:
,;-. lr- J (. if
4. Reasons for Developing Your Santa Monica Condo Project Now
Whicn of the following are the MOST important and SECOND most important reason you
decided to go forward with City permits for your project: [MARK # I AND #2 ONLY]
_ Stronger real estate market (able to sell units at higner price)
_ Lower cost of financing
C- Recent changes in City policies
_ Other (specify:
F CHANGE IN CITY POLICIES IS #1 OR #2:
a. What change was that?
b. Which of the following recent changes were the MOST important to you:
_ Changes in development standards (If#1 or #2, specifY what----.J
_ Changes in permit requirements (If#1 or #2, specifY what----.J
_ Ability to pay an in-lieu fee for the affordable housing requirement
_ The new amount of the in-lieu fee for the affordable housing
requirement
_ Other (specify:
5. Follow-Up
We plan to speak witn a few developers in more depth ahout project finances and the
effects of City development rules. Would you be willing to meet with me to discuss' your project?
Again, any information you are willing to share with us will be kept confidential.
Do not want to meet.
_ Willing to meet.
Best day of week, time, etc:
Thanks, I'll call you back to arrange an appointment.
That's all we needed to ask. Thank you very much for your time.
cr' ! n