SR 12-18-2018 13G 13.G
December 18, 2018
Council Meeting: December 18, 2018 Santa Monica, California
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CITY CLERK’S OFFICE - MEMORANDUM
To: Mayor and City Council
From: Denise Anderson-Warren, City Clerk, Records & Elections Services
Department
Date: December 18, 2018
13.G Request of Councilmembers McKeown and Himmelrich that the Council, in
order to achieve mandated compliance with voter-approved Measure R,
which requires that 30% of all new multi-family housing be affordable,
direct staff to prepare amendments to the Affordable Housing Production
Plan disallowing the current option for developers to provide fewer
extremely low-income units, until such time as a feasibility study can be
completed to extend, as economically justified, to the rest of the City, the
Downtown Community Plan formula requiring a mix of units at appropriate
sizes and affordability levels.
To: Santa Monica Housing Commission
From: Chair Michael Soloff
Re: Item 4C on Agenda for November 15, 2018 Meeting
I. EXECUTIVE SUMMARY
While it is projected that the City will meet or exceed all of its other housing production goals
during the 2013-2021 Housing Element cycle, it is projected that only 25% of all new housing
completed during that time period will be affordable housing, rather than 30% as mandated by
Proposition R. While the lack of an HTF funding source for the first half of that time period
undoubtedly played a role, so too did the over-incentivization in the Affordable Housing
Production Program for developers to choose to provide a very small number of extremely low
income units in complete satisfaction of their inclusionary housing obligations.
The City Council remedied this issue in the Downtown Community Plan in July of 2017 based
on the HRA feasibility analysis. The Housing Commission recommended in 2017 that a review
take place of the AHPP outside the Downtown Community Plan, and the Housing Commission
recommended in 2018 that the City Council put into the initial HTF plan a direction to Staff to
do so as soon as possible. While the City Council adopted this recommendation, Staff advises
that Planning Staff is necessary to the process of obtaining the feasibility study essential to any
such review, and that Planning Staff reports it is fully engaged on other matters that City Council
prioritized over the AHPP review outside of the downtown.
The 105 unit Tier 2 project on Pico Boulevard considered for a Development Review Permit by
the Planning Commission at its November 7, 2018 meeting illustrates that the AHPP
requirements outside of the Downtown Community Plan continue to undermine City efforts to
meet Proposition R’s Charter mandate. By providing only 8 extremely low income affordable
units, that project imposes on the City the obligation to produce 34 new affordable housing units
just to meet the Proposition R mandate created by this one project.
The Housing Commission should discuss what, if anything, can and should be done in light of
these realities. Possibilities include (1) asking Council to preclude the extremely low income
option outside the downtown until a feasibility study can be conducted and/or (2) urging the City
Council to direct that a higher priority be placed on obtaining and acting upon such a feasibility
study.
II. BACKGROUND
A. The City’s Affordable Housing Production Program
1. The AHPP In Areas Outside The Areas Governed By The Downtown
Community Plan
In 1990 the voters of Santa Monica passed Proposition R, which amended the City Charter to
add the following provision:
The City Council by ordinance shall at all times require that not less than thirty
percent (30%) of all multifamily-residential housing newly constructed in the City
on an annual basis is permanently affordable to and occupied by low and
moderate income households. For purposes of this Section, “low income
household” means a household with an income not exceeding sixty percent (60%)
of the Los Angeles County median income, adjusted by family size, as published
from time to time by the United States Department of Housing and Urban
Development, and “moderate income household” means a household with an
income not exceeding one hundred percent (100%) of the Los Angeles County
median income, adjusted by family size, as published from time to time by the
United States Department of Housing and Urban Development. At least fifty
percent (50%) of the newly constructed units required to be permanently
affordable by this Section shall be affordable to and occupied by low income
households.
Santa Monica City Charter Section 630.
Pursuant to this voter mandate, the City Council subsequently adopted an Affordable Housing
Production Program (“the AHPP”). As relevant to this Agenda Item, the AHPP currently
provides for Tier 2 projects located outside the boundaries of the area governed by the
Downtown Community Plan:
All Tier 2 projects must meet the following requirements:
1. Affordable Housing. Applicants proposing residential and mixed-use
projects shall incorporate the following:
a. At least 50 percent more affordable housing units than would be
required pursuant to Section 9.64.050.1 Any fractional affordable
1 Section 9.64.050(C) provides (bolding added):
C. For all other multi-family applicants, the multi-family project applicant
agrees to construct at least:
1. five percent of the total units of the project for 30% income
households at affordable rent;
2. ten percent of the total units of the project for 50% income
households at affordable rent;
3. twenty percent of the total units of the project for 80% income
households at affordable rent; or
4. one hundred percent of the total units of a project for moderate
income households at affordable rent.
housing unit that results from this formula shall be provided as a whole
affordable housing unit (i.e., any resulting fraction shall be rounded up to
the next larger integer).
b. On-site affordable housing units shall be affordable to 30%, 50%,
or 80% income households depending on the percentage of affordable
units being provided and shall not include any Moderate Income units,
as defined by Section 9.64.020. Subject to the modifications contained in
this Subsection (A), all of the affordable units shall comply with the
provisions of Chapter 9.64.
c. Affordable housing units required by this Subsection (A) may be
provided offsite, pursuant to Section 9.64.060 2, if the affordable
housing units are owned in whole or part and operated by a non-
profit housing provider for the life of the project, and the Final
Construction Permit Sign Off or Certificate of Occupancy for the
affordable units is issued prior to or concurrently with the Tier 2
project.
2. Unit Mix. Applicants proposing residential and mixed-use projects shall
incorporate the following:
a. For market rate units:
i. At least 15% of the units shall be three-bedroom units;
ii. At least 20% of the units shall be two-bedroom units;
iii. No more than 15% of the units shall be studio units;
iv. The average number of bedrooms for all of the market rate
units combined shall be 1.2 or greater; and
v. Notwithstanding Subsections (A)(2)(a)(i-ii) above, any
fractional housing unit less than 0.5 that results from this unit mix
shall be rounded down to the next lower integer. Any fractional
housing unit of 0.5 or more that results from this unit mix shall be
rounded up to the next larger integer.
b. For affordable housing units:
2 Section 9.64.060(B) provides (bolding added):
B. For all other multi-family project applicants, the applicant shall agree to
construct the same number of affordable housing units as specified in Section
9.64.050(C).
i. The average number of bedrooms for all of the affordable
housing units combined shall be equal to or greater than the
average number of bedrooms provided for all of the market rate
units pursuant to Subsection (A)(2)(a) of this Section.
c. The Director may grant a waiver from this unit mix requirement
pursuant to the requirements and procedures for Waivers in Chapter 9.43.
d. The requirements of Subsection (A)(2) of this Section shall not apply
to project applications filed prior to the effective date of this Ordinance.
Santa Monica Municipal Code §§ 9.23.030(C)(1)-(2) (bolding added).
2. AHPP Requirements In The Downtown Community Plan
With the adoption of the Downtown Community Plan in the summer of 2017, AHPP
requirements for projects in the areas governed by that plan are as follows (emphases in
original):
Housing and Mixed-Use Residential Projects Qualifying Benefits. An applicant
seeking approval for a housing or mixed-use residential project that exceeds the base floor
area ratio or height allowed in the district where the project is located shall provide
community benefits in each of the following categories.
1. Housing. All Tier 2 projects and Tier 3 projects less than 75,000 square feet must
meet the following requirements:
a. Affordable Housing. Subject to the modifications contained in this Section,
all of the affordable units shall comply with the provisions of Chapter 9.64. As set
forth in Table 9.10.070.A, applicants proposing residential and mixed-use projects
shall incorporate the following:
i. A percentage of the total number of units in the project, corresponding
with the height or FAR of the project, shall be deed-restricted as on-site
affordable housing units. Any fractional affordable housing unit that results
from this formula shall be provided as a whole affordable housing unit (i.e.,
any resulting fraction shall be rounded up to be the next larger integer).
Table 9.10.070.A: On-Site and Off-Site Affordable Housing Requirements
Height
(Feet)
On-Site
Affordable
Housing
%
Off-Site Affordable
Housing %
On-Site Affordable
Housing % for
Development
Agreements and
Planning
Applications
Complete on or
before 11/11/16
Off-Site Affordable
Housing % for
Development
Agreements and
Planning
Applications
Complete on or
before 11/11/16
40-50 20% 25% 20% 25%
52 21% 26% 20% 25%
54 22% 27% 20% 25%
56 23% 28% 20% 25%
58 24% 29% 20% 25%
60 25% 30% 20% 25%
62 26% 31% 20% 25%
64 27% 32% 20% 25%
66 28% 33% 20% 25%
68 29% 34% 20% 25%
70-84 30% 35% 20% 25%
ii. Affordable housing units may be provided off site pursuant to
Section 9.64.060 except that the total number of affordable housing units
shall be increased to the percentage of the total number of units in the project
as set forth in Table 9.10.070.A,. The off-site affordable housing units shall
meet the following conditions:
(1) The affordable housing units are owned in whole or part and
operated by a non-profit housing provider for the life of the project;
(2) The final construction permit sign off or certificate of occupancy
for the affordable units is issued prior to or concurrently with the Tier 2
or qualifying Tier 3 project; and
(3) The location of the off-site location shall be within the boundaries
of the Downtown or within a one-quarter mile radius of the market rate
units.
iii. The total number of affordable housing units shall incorporate the
affordability mix specified in Table 9.10.070.B. Any fractional affordable
housing units that result from the percentage mix of total affordable housing
units shall be aggregated into whole affordable housing units (i.e., any
resulting fraction shall be added to other resulting fractions). The resulting
whole units may be provided at 30%, 50%, 80%, or moderate-income
household affordability levels.
Table 9.10.070.B. Affordability
Affordability Level Affordability Mix of Total Number of
Affordable Housing Units
30% Income Household 20%
50% Income Household 20%
80% Income Household 30%
Moderate Income 30%
b. Unit Mix. Applicants proposing residential and mixed-use projects shall
incorporate the following:
i. For market rate units:
(1) At least 15% of the units shall be three-bedroom units;
(2) At least 20% of the units shall be two-bedroom units:
(3) No more than 15% of the units shall be studio units;
(4) The average number of bedrooms for all of the market rate units
combined shall be 1.2 or greater; and
(5) Notwithstanding subsections (C)(2)(a)(i) through (iii) above, any
fractional housing unit less than 0.5 that results from this unit mix shall
be rounded down to the next lower integer. Any fractional housing unit
of 0.5 or more that results from this unit mix shall be rounded up to the
next larger integer.
ii. For affordable housing units the average number of bedrooms for all of
the affordable housing units combined shall be equal to or greater than the
average number of bedrooms provided for all of the market rate units
pursuant to subsection (C)(2)(a) of this Section.
iii. The Director may grant a waiver from this unit mix requirement
pursuant to the requirements and procedures for Waivers in SMMC
Chapter 9.43.
B. Prior Housing Commission Recommendations To City Council Regarding
The AHPP
At several meetings in June 2017, the Housing Commission considered the then draft Downtown
Community Plan, and made a number of recommendations to the City Council (including
recommendations to increase the percentage of affordable units required for project approval in
light of the results of the HRA feasibility study performed in connection with the preparation of
the draft plan). Of relevance to this agenda item, the Housing Commission recommended
(bolding added):
Review the entire Affordable Housing Production Program now for consistency
with Proposition R mandated income targeting and rent limits, and to assure that
the affordability requirements of the AHPP outside of the downtown area
are based on an economic analysis similar to that conducted for the
DOWNTOWN COMMUNITY PLAN.
One year later, in connection with review of the draft initial Housing Trust Fund Plan for the
2013-2021 Housing Element, the Housing Commission recommended that this Plan include the
following:
City staff is directed to develop as soon as possible, in consultation with the
Planning and Housing Commissions, a proposal to adjust the AHPP program that
applies outside of the Downtown Community Plan. The proposal shall be based
on a feasibility study, and shall take into account past and projected future
production of housing through inclusionary zoning and HTF funded projects, as
well as the quantified objectives in the Housing Element and the requirements of
Proposition R.
The Staff Report to City Council recommended that the initial HTF Plan include this provision,
and City Council did include it.
C. Current Status Of Updated AHHP Feasibility Study For Areas Outside Of
The Areas Governed By The Downtown Community Plan
Based on communications with Staff, it appears that no steps have yet been taken to obtain an
updated feasibility study for areas outside of the areas governed by the Downtown Community
Plan. Nor is there any projected date for when such a study will be undertaken. Staff advises
that work by the Planning Department is necessary to proceed with arranging for such a
feasibility study, and that Planning Department Staff advises that it is presently fully engaged on
other planning issues given a higher priority by the City Council.
D. Impact Of Existing AHPP Requirements Outside The Downtown On
Acheivement Of Proposition R Mandates
1. Evidence That The Existing AHPP Requirements Outside Of
Downtown Continue To Incentivize Developers To Provide Only A
Small Number Of Extremely Low Income Units In Tier 2 Projects
The AHPP requirements outside of downtown create an enormous economic incentive for
developers to meet their AHPP requirement by providing a small number of extremely low
income units. This is because (1) the developer of a Tier 2 project outside of the downtown need
only make 7.5% of the units in the building deed-restricted for extremely low income residents in
order to satisfy the AHPP, but needs to make 15% of the units deed-restricted for very low
income residents or 20% of the units deed-restricted for low income residents in order satisfy the
AHPP. The small amount of revenue the developer loses by making units extremely low income
(rather than very low income or low income) is tiny compared to the additional revenue the
developer receives from charging market rate on those additional units it otherwise would have
to make either very low income or low income deed-restricted units.
This fact is illustrated by the very small differences in the percentage of affordable extremely
low, very low and low income units HRA found feasible in its study of downtown prototypes:
This reality is also illustrated in the most recent Tier 2 project to come before the Planning
Commission (at its 11/7/18 meeting) for a Development Review Permit—216-234 Pico
Boulevard. This mixed-use project will create 105 new residential units, only eight of which will
be deed-restricted affordable units for extremely low income residents.
2. The Current Status Of The City’s Efforts To Comply With
Proposition R During The 2013-2021 Housing Element Period
Based on the data and projections provided by Staff in connection with the Housing
Commission’s recent review of the draft Initial HTF Plan, the following is the best information
currently available:
a. Without doing anything more, Santa Monica is projected to produce (i.e.,
complete or issue building permits for) more than three times the number of market-rate units
called for by the current Housing Element. See Part II.B.1 of Personal and Individual Views of
Housing Commission Chair Michael E. Soloff regarding Initial Housing Trust Fund Plan
(submitted to City Council in connection with Item 8D on the Council’s July 24, 2018 Agenda
(provided herewith).
b. Without doing anything more, Santa Monica is projected to produce (i.e.,
complete or issue building permits for) more than the overall number of deed-restricted
affordable housing units called for by the current Housing Element. However, the unit mix will
deviate from the mix called for by the current Housing Element in that it will include many more
extremely-low (30% AMI) and very-low income (50% AMI) units, but considerably fewer low-
income (80% AMI) units. See id . Part II.B.2.
c. Without doing anything more, Santa Monica is projected to fall short of
Proposition R’s requirements by approximately 130 affordable housing units. Proposition R
requires 30% of all new housing completed each year be affordable housing, with at least half of
that 30% (i.e., at least 15% of all new housing) affordable to those earning 60% or less of the Los
Angeles County median income. It is projected that more than 15% of the new housing that will
be completed during the 2013-2021 Housing Element will be affordable to those earning 60% or
less of the Los Angeles County median income, thus meeting one of Proposition R’s two
requirements. But only 25% of the new housing overall will be some form of affordable
housing, rather than the required 30%. See id. Part II.C below.
III. DISCUSSION
The existing AHPP requirements outside of the areas governed by the Downtown Community
Plan incentivize developers to provide a very small number of extremely low income units in
their Tier 2 projects. This fact is among the factors that has contributed to the projected failure
of the City to meet its Proposition R Charter mandate during the 2013-2021 Housing Element. It
also is exacerbating that projected failure.
The recent mixed use project at 216-234 Pico Boulevard illustrates the problem. That project
adds 105 new residential units. In order to meet Proposition R’s 30% mandate, 32 of those units
would have to be deed-restricted affordable units. As only eight will be deed-restricted
affordable units, the City will have to spend its own funds to generate 35 additional affordable
housing units just to meet Proposition R’s Charter mandate created by this project (105 private
units plus 34 City financed units is 139 total units; 30% of 139 units is 41.7 units; 8 inclusionary
units and 34 City financed units is 42 affordable units). Even if the City financed units only
require $275,000 per unit in HTF funds because they will be part of a tax credit project, the 34
units will cost the City just under $9.4 million.
By contrast, if the same project had provided 15% very low income units (an alternative under
the AHPP). 16 of the 105 units would be deed restricted affordable units. Under that scenario,
the City would only need to finance 22 additional affordable housing units to meet Proposition
R’s Charter mandate (105 private units plus 22 City financed units is 127 total units; 30% of 127
units is 38.1 units; 16 inclusionary units and 22 City financed units is 38 affordable units).
Assuming again that the City financed units only require $275,000 per unit in HTF funds
because they will be part of a tax credit project, the 22 units will cost the City just over $6
million.
In the Downtown Community Plan, the City decided to require a mix of affordability levels
among any inclusionary units in a project. In order to implement that approach—and to set the
inclusionary requirement at the maximum economically justified level—a new feasibility study
is required for projects outside the downtown. But no such study is currently on the horizon.
The Housing Commission should discuss what, if anything, can and should be done in light of
these realities. Possibilities include (1) asking Council to preclude the extremely low income
option outside the downtown until a feasibility study can be conducted and/or (2) urging the City
Council to direct that a higher priority be placed on obtaining and acting upon such a feasibility
study.
TO: Mayor Davis, Mayor Pro Tem O’Day, and Councilmembers Himmelrich, McKeown,
Morena, Vazquez, and Winterer
FROM: Shawn Landres, Sunset Park resident
DATE: December 18, 2018
RE: Item 13G
I write to urge the City Council to expedite review of and, as appropriate based on the results of a
feasibility study, revisions to the Affordable Housing Production Program (AHPP). It would be
beneficial for this be completed prior to the consideration and completion of the Pico
Neighborhood, Memorial Park, and Bergamot Area specific plans, as revisions to the AHPP could
have a direct-line effect on new housing applications in those areas, many of which already are
suffering from both residential displacement and neighborhood-serving commercial
displacement.
As Councilmembers know all too well, our community faces continuing housing challenges,
especially for working families whose household incomes exceed 30% of area median income but
are far from enough to afford market-rate units. Furthermore, development application patterns
and commercial vacancy patterns amply demonstrate, economic realities—opportunities and
constraints alike—vary by neighborhood, as do state limitations on local discretionary authority.
A feasibility study cannot anticipate all of these dynamics, still less the potential impact of
legislation like SB50 (if it is passed during the current 2019-20 legislative session) or, after 2020,
the potential for Proposition 13 reform (splitting the roll). But we cannot assume that what has
delivered Proposition R-compliant housing to date will continue to do so.
If Council wishes to amend the Extremely Low Income (ELI) requirement or suspend it as an option
on an emergency interim basis, while concurrently conducting the AHPP feasibility study, it should
first consider potential near-term impacts on housing production overall, production of
Proposition-R compliant units, and maintaining SB35 compliance.
Therefore, Council should consider at least three options — (1) eliminating the ELI requirement all
together, (2) raising the ELI minimum to 10%, or (3) retaining the current requirement pending
the feasibility study — and select the option least likely to disrupt overall new housing production,
reduce production of Proposition R-compliant units, or put the City’s SB35 compliance at risk.
Ideally, the Planning Commission should review recommended options prior to submission to
Council. Again, none of these would be or should be a substitute for reviewing the AHPP as soon
as possible.
Council already is on record in favor of evaluating the effectiveness of the AHPP and updating it as
necessary and feasible. Consistent with that policy, I hope that Council will direct that a feasibility
study can be completed and the AHPP updated as soon as possible, and that Council direct the
Planning Commission and Planning staff to be directly involved in the AHPP amendment process,
through study sessions, public hearings, and recommendations to Council.
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Vernice Hankins
From:Paula Larmore <plarmore@hlkklaw.com>
Sent:Tuesday, December 18, 2018 10:52 AM
To:Terry O’Day; Councilmember Kevin McKeown; Gleam Davis; Ted Winterer; Tony
Vazquez; Sue Himmelrich; councilmtgitems; Greg Morena
Cc:Lane Dilg
Subject:Agenda Item 13.G: Any Council Discussion Regarding Changes to the AHPP's
Extremely-Low Income Housing Option Requires Further Analysis and Information
Dear Councilmembers,
I am writing with regard to Item 13.G on tonight’s agenda to ask that you do not direct City Staff to prepare an interim
ordinance to eliminate the extremely‐low income option from the Affordable Housing Production Program (“AHPP”). I
request that you defer any discussions about revising the extremely‐low income option in the AHPP unless and until the
following steps are taken:
1. Before considering modifying the AHPP to eliminate or modify the extremely‐low income option, the City
Council needs information about this option. Specifically, the City Council needs to be provided with the reasons
why the extremely‐low income option was added to the AHPP in 2013 and understand what, if anything, has
changed that would now cause the Council to take action that would eliminate production of extremely‐low
income housing. A 2012 Council Staff Report documents the need for extreme‐low income housing and
indicates that the vast majority of seniors, disabled persons and homeless persons on the City’s wait list fall into
the extremely‐low category. A 2014 presentation to the City Council documents that 79% of the persons on the
City’s affordable housing wait list fall into the extremely‐low income category.
2. The Council needs to conduct a feasibility analysis to see if Tier 1 projects are feasible with 10% deed‐restricted
affordable units and if Tier 2 projects are feasible with 15% deed‐restricted affordable units. Based on housing
projects currently proposed on the boulevards and the lack of applications for housing projects in the
Downtown since adoption of the Downtown Community Plan, I am concerned that eliminating the extremely‐
low income option could further reduce housing production in the City.
3. The Council needs to conduct a thorough review of the Housing Element and consider the amendments that
would be needed in order to eliminate the extremely‐low income option from the AHPP. Based on my brief
review over the weekend, I found several Housing Element goals and policies that appear to require amendment
in order to eliminate the extremely‐low income option. From a public policy perspective, one of the benefits of
processing a Housing Element amendment is review by the State’s Housing and Community Development
Department before the amendment is adopted. Moreover, the Housing Element includes important
information about the need for extremely‐low housing, including information about the populations living in the
City that fall into the extremely‐low income category and the loss of extremely‐low income housing (including
mobile homes) in the City. I would think the Council would need to review this Housing Element information
before moving forward with direction to eliminate the extremely‐low income option, even for an interim period.
4. As City officials have pointed out recently, our economy appears headed toward a recession. As such, this
seems like a particularly bad time to impose additional burdens on housing production, including affordable
housing.
5. If the Council feels that an interim measure is needed, the Council should direct Staff to explore an interim
measure providing an expedited Administrative Approval process (i.e. a procedural incentive) for projects that
provide more affordable housing than required by the AHPP (rather than eliminating the extremely‐low income
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option). For example, if a Tier 2 housing project up to 75,000 sf provides 10% deed‐restricted units for
extremely‐low income households (rather than 7.5% extremely low), then the project would qualify for an
Administrative Approval.
6. Above all the City’s review of housing needs to be broadened beyond the AHPP’s extremely‐low income
option. The Council needs to concurrently consider incentives for housing production on the boulevards. The
Planning Commission has previously indicated that any changes to the AHPP should be looked at
comprehensively with a review of housing production on the boulevards since adoption of the 2015 Zoning
Ordinance. The risks with eliminating the extremely‐low income option, even for an interim period, are too
high. Eliminating this option may stemming housing production on the boulevards and/or further encouraging
developers to choose the Tier 1 option rather than building more housing in a Tier 2 project. The Council
recently increased affordable housing requirements dramatically in the Downtown, where most of the City’s
new housing has previously been approved. The result has been that no new applications for housing projects in
the Downtown have been filed since adoption of the Downtown Community Plan. Thus, the City cannot afford
to also stemming housing production on the boulevards. The City should be looking for ways to further
incentivize housing projects on the boulevards, not to further burden it. The extremely‐low income option has
proven feasible for non‐Downtown housing projects and has resulted in some (not enough in my opinion)
housing production on our boulevards. The Council should not consider eliminating it without a robust
discussion and study about the impacts of such an action and incentives for housing production outside of the
Downtown.
Thank you for your consideration.
Paula
Paula J. Larmore | Attorney at Law
1250 Sixth Street, Suite 200 | Santa Monica, CA 90401
O: (310) 656‐4311 | F: (310) 392‐3537 | plarmore@hlkklaw.com
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December 17, 2018
Re: Support for Item 13G, 12/18/18 Agenda
Dear Mayor Davis and Councilmembers:
At a meeting on December 8, 2018, the Steering Committee of Santa Monicans
for Renters’ Rights (SMRR), as well as the other SMRR members in attendance, voted
unanimously to ask Council to take action immediately (1) to temporarily eliminate the
option for developers to satisfy their Affordable Housing Production Program (AHPP)
requirements outside of the Downtown by providing just 7.5% of the project units as
affordable housing units, and (2) to direct Staff to commence and complete a feasibility
study to determine an AHPP requirement outside the Downtown that more effectively
meets the voter approved Proposition R affordable housing production mandate
included in Section 630 of the City Charter (“Prop R).
The existing AHPP and community benefit requirements outside of the areas
governed by the Downtown Community Plan incentivize developers to provide a very
small number of extremely low-income units in Tier 2 projects. Specifically, AHPP and
community benefits requirements outside of Downtown require a developer of a Tier 2
project to make only 7.5% of the units deed-restricted for 30% AMI households
(extremely-low), but require 15% of units to be deed-restricted for 50% AMI
households (very-low), and 30% of units deed-restricted for 80% AMI households (low).
Numerous Tier 2 project approvals at the Planning Commission electing the 7.5%
option, and additional data and projections discussed at the Housing Commission in
2018, indicate that this incentive is among the factors contributing to and exacerbating
the City’s projected failure to meet Prop R overall affordable housing production
requirement by approximately 130 affordable housing units during the current 2013-
2021 Housing Element, while simultaneously producing more than three times the
number of market rate units called for by the current Housing Element.
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In the Downtown Community Plan, the City Council—after receiving a
feasibility study, and input from Staff, the Planning and Housing Commissions, and the
public—decided to require a mix of affordability levels among any inclusionary units in
a project. This is one approach that the City could explore for the districts outside of
Downtown. We therefore urge the Council, in addition to immediately halting the
incentive for developers to choose the existing extremely-low income option, to direct
Staff to commence and complete a feasibility study that will help Council determine an
appropriate AHPP formula outside of the Downtown that will more effectively assist
City Council in meeting Prop R’s mandate that “[t]he City Council by ordinance shall at
all times require that not less than thirty percent (30%) of all multifamily-residential
housing newly constructed in the City on an annual basis is permanently affordable to
and occupied by low and moderate income households.”
Thank you for your support.
Sincerely,
Patricia Hoffman Denny Zane
Co-Chair, Santa Monicans for Renters’ Rights Co-Chair, Santa Monicans for Renters’ Rights
Item 13-G
12/18/18
15 of 16 Item 13-G
12/18/18
1
Vernice Hankins
From:Council Mailbox
Sent:Tuesday, December 18, 2018 1:37 PM
To:Gleam Davis; Terry O’Day; Councilmember Kevin McKeown; Tony Vazquez; Sue
Himmelrich; Ted Winterer; Gleam Davis
Cc:councilmtgitems
Subject:FW: Attachment to Item 13G on the Council's 12/18/18 Agenda
Council‐
Please see the below email regarding Item 13G on tonight’s agenda.
Thanks,
Stephanie
From: Soloff, Michael [mailto:Mike.Soloff@mto.com]
Sent: Thursday, December 13, 2018 1:00 PM
To: Council Mailbox <Council.Mailbox@SMGOV.NET>
Cc: Michael Soloff <Michael.Soloff@SMGOV.NET>
Subject: Attachment to Item 13G on the Council's 12/18/18 Agenda
Attachment “a” to Item 13G of your December 18, 2018 meeting agenda is a Report to the Santa Monica Housing
Commission presented at our November meeting. This version incorporates two minor numerical corrections made
orally at the November meeting.
It has come to my attention that there also is a typographical error on page 7 of that Report—in the last full paragraph
on that page, where it says “or 20% of the units deed‐restricted for low income residents”, it should say “or 30% of
the units deed‐restricted for low income residents.”
Thank you.
Michael E. Soloff
Chair, Santa Monica Housing Commission
Item 13-G
12/18/18
16 of 16 Item 13-G
12/18/18
38547047.1 1
Peronal Individual Views Of Housing Commission Chair Michael E. Soloff
HOUSING TRUST FUND PLAN FOR 2013-2021 HOUSING ELEMENT CYCLE
(Item 8.D for July 24, 2018 City Council Meeting)
I. SUMMARY OF DATA GATHERED AND CONCLUSIONS DRAWN
1. The Housing Trust Fund (“HTF”) planning process adopted by City Council in July of
2017 provides a mechanism for the City Council—after input from Staff, the public, and the
Housing Commission—to set priorities for expenditure of scarce HTF funds during each
Housing Element. That process begins with an initial HTF plan that is to be adopted at the
beginning of each Housing Element. Each of the subsequent annual reports required by that
planning process (1) allows tracking of the City’s progress toward its goals under the Housing
Element, Proposition R, and the initial HTF plan, (2) provides an opportunity for the City
Council—after input from Staff, the public, and the Housing Commission—to modify the initial
plan and/or the AHPP program in light of new developments, and (3) provides transparency
regarding the sources and uses of HTF funds. See Part II.A below.
2. The current Housing Element was adopted in December of 2013, and runs through 2021.
Thus, the initial HTF plan for the current Housing Element must take account of what already
has transpired during the first half of the Housing Element:
a. Without doing anything more, Santa Monica is projected to produce (i.e.,
complete or issue building permits for) more than three times the number of market-rate units
called for by the current Housing Element; See Part II.B.1 below.
b. Without doing anything more, Santa Monica is projected to produce (i.e.,
complete or issue building permits for) more than the overall number of deed-restricted
affordable housing units called for by the current Housing Element. However, the unit mix will
deviate from the mix called for by the current Housing Element in that it will include many more
extremely-low (30% AMI) and very-low income (50% AMI) units, but considerably fewer low-
income (80% AMI) units. See Part II.B.2 below.
38547047.1 2
c. Without doing anything more, Santa Monica is projected to fall short of
Proposition R’s requirements by approximately 130 affordable housing units. Proposition R
requires 30% of all new housing completed each year be affordable housing, with at least half of
that 30% (i.e., at least 15% of all new housing) affordable to those earning 60% or less of the Los
Angeles County median income. It is projected that more than 15% of the new housing that will
be completed during the 2013-2021 Housing Element will be affordable to those earning 60% or
less of the Los Angeles County median income, thus meeting one of Proposition R’s two
requirements. But only 25% of the new housing overall will be some form of affordable
housing, rather than the required 30%. See Part II.C below.
3. The initial HTF plan also must take into account existing and expected future revenues
(see Part II.E below):
a. As of May 2017, Staff reported that the HTF had ~$57 million in funds not yet
committed to any particular affordable housing project or program.1 This includes a variety of
one-time funds provided by City Council, prior tax increment “boomerang” funds provided by
City Council, and initial GS/GSH funds;
b. Staff projects that the HTF will receive an additional ~$8-$9 million annually in
GS/GSH funds, and an additional ~$1.2 million annually in tax increment “boomerang” funds;
c. Staff projects that the HTF will receive during the period from 2018-2022 an
additional ~$49.3 million in one-time RDA loan repayments. These funds will bring the total
amount of one-time RDA loan repayments committed by City Council to the HTF to ~$71.2
million. These one-time funds, together with the ~$1.2 million annually in “boomerang” funds
that the City Council also has committed to the HTF, represents the City Council keeping faith
1 The Staff report for this Item states that $81 million is currently on hand in the HTF. Staff
advises that this simply is an updated figure that includes receipt of the next tranche of GS/GSH
monies discussed in paragraph 3.b, and part of the one-time RDA loan repayments discussed in
paragraph 3.c.
38547047.1 3
with the voters and matching from City funds the first nine or ten years of projected GS/GSH
monies.
d. The currently available funds, together with the projected future revenues outlined
above, should be sufficient by themselves to sustain $16 million in annual Housing Trust Fund
expenditures for at least the next fifteen years.
4. In light of the foregoing, the Housing Commission voted to recommend that the City
Council include the following six elements in its initial HTF plan for the 2013-2021 Housing
Element (every one of which will be subject to annual review and potential adjustment in
accordance with the planning process adopted by City Council in July 2017):
a. “Unless an unusually advantageous opportunity presents itself during a
particular fiscal year, the City should enter into HTF spending commitments totaling no
more than $15 million to $18 million during each fiscal year. This will help to assure that
funds are available when unusually advantageous opportunities arise. Examples of
unusually advantageous opportunities include, but are not limited to, (1) constructing
affordable housing on City owned land, (2) constructing affordable housing in a manner
that provides unusual and deep cost-savings, and (3) constructing affordable housing
financed in a manner that provides an unusual and deep reduction in the HTF contribution
required to complete the project.”
This recommendation is for City Council to set a soft annual cap on new HTF commitments
(roughly equal to the highest historical annual funding averages) that Staff should exceed only if
particularly cost-effective or otherwise particularly advantageous opportunities are presented in
any fiscal year.
The first purpose of this recommendation is for City Council to direct Staff—and assure the
public—that finding the most cost-effective projects is a priority. This is important because in
2015-2016 Staff approved two acquisition rehabilitation projects, each of which spent more than
$500,000 of the limited HTF funds per unit (including one project expressly designed to put just
a single individual in each unit). By contrast, it currently costs the HTF itself about half as much
38547047.1 4
to create a new unit in a new construction tax credit project (an example of “constructing
affordable housing financed in a manner that provides an unusual and deep reduction in the HTF
contribution required to complete the project.”). See Part II.D below.
The second purpose is for City Council to direct Staff that—absent unusually advantageous
opportunities—it should not immediately spend all the money on-hand (given that doing so
would potentially leave the HTF without resources when particularly cost-effective opportunities
do come, such as the opportunity to build on public land, the opportunity to acquire land during a
real estate recession, or the opportunity to do tax credit projects). This is important because the
way City Council has matched GS/GSH so far is principally by depositing certain one-time RDA
loan repayments into the Housing Trust Fund, thereby creating a bulge of funds up front. In
addition, the Housing Commission—with the assistance of CCSM, Step Up, and Staff—has
embarked on an effort to identify ways to reduce the cost of delivering new units.
The Staff report on this Item at page 7 raises the following concern regarding this
recommendation (emphasis added):
The Initial Plan’s limitation on annual HTF spending of $15-$18 million could
constrain opportunities to preserve and produce affordable housing at a juncture
when a significant amount of funding is available . . . . Although the Initial Plan
allows for exceeding the annual funding spending limitation if an “unusually
advantageous opportunity presents itself”, the absence of criteria as to what
qualifies for a departure from the proposed annual HTF spending limit could
result in missed opportunities. The existing HTF Guidelines approved by Council
establish per-apartment loan limits but have not previously established an annual
limit on overall HTF spending of available funding. If Council wishes to ensure
that all available funding for affordable housing is invested in a timely manner as
opportunities arise, then restricting the use of available funding would be
inconsistent with that goal.
However, the Housing Commission recommendation does contain illustrative guidance:
Examples of unusually advantageous opportunities include, but are not limited to,
(1) constructing affordable housing on City owned land, (2) constructing
affordable housing in a manner that provides unusual and deep cost-savings, and
(3) constructing affordable housing financed in a manner that provides an unusual
and deep reduction in the HTF contribution required to complete the project.
38547047.1 5
The Housing Commission intentionally adopted this illustrative guidance approach to avoid
overly constraining Staff and missing out on usually advantageous opportunities simply because
of an inability to list all such opportunities in advance. The Housing Commission further
anticipated that the annual HTF plan review process would provide an ongoing opportunity for
Staff, the public, the Housing Commission and ultimately City Council to provide more refined
guidance in light of actual experience. The Housing Commission did not accept, however, that
the existing HTF per unit spending limits (which, for example, now exceed $600,000 for the
acquisition / rehabilitation of a studio or one-bedroom apartment) constitutes adequate guidance
to Staff regarding the cost-effective and wise expenditure of scarce HTF funds.
City Council now must decide—subject to review in a year—whether the City’s goals and the
public’s expectations for the expenditure of tens of millions of public dollars are best served by
the existing approach of almost completely unfettered Staff discretion, the alternative approach
recommended by the Housing Commission, or some other alternative approach (for example,
calling the $15-$18 million a “target” rather than a “soft cap”, and/or making either subject to the
same or different exceptions).
b. “A priority goal of the Plan is to ramp up the Preserving Our Diversity
(“POD”) local rent subsidy program to a range that requires a commitment of no more
than $2 million per fiscal year in HTF funds. No actual expansion of the POD program
will occur unless and until a detailed plan for doing so is proposed by City staff, vetted by
the Housing Commission, and approved by the City Council. Any portion of the potential
$2 million in annual HTF funding that is not actually used for the POD program in any
particular fiscal year shall remain available for commitment in future fiscal years to other
Plan priorities.”
This recommendation is for City Council to set the scaling up of the Preserve Our Diversity
(“POD”) program as a priority goal for achievement during the 2013-2021 Housing Element.
Actual scaling up would occur only after a plan for doing so is created by Staff, vetted by the
Housing Commission , and approved by City Council. This recommendation was the focus of
38547047.1 6
all—or virtually all—of the division between the majority of Housing Commissioners and the
dissenting Housing Commissioners.
Between December 2015 and the present, the Housing Commission recommended, the City
Council approved, and the City designed and launched a highly innovative rent subsidy pilot
program to help our extremely low income seniors remain in their long-term rent controlled
apartments with dignity. See Part II.G below.
HUD estimates that more than 4,000 Santa Monica renter households are extremely low
income—for example, seniors with no income other than basic social security—and pay more
than 50% of their meagre incomes in rent. Another close to 2,000 Santa Monica renter
households are very low income—just slightly better off but still, for example, individual seniors
with about $20,000 a year in income—who likewise pay more than 50% of their meagre incomes
in rent. See Part II.F below.
The pilot program consists mostly of single person households surviving on less than $300 per
month after rent for every other expense of life. Extrapolating from the average pilot program
subsidy, the $2 million maximum annual budget recommended by a majority of the Housing
Commission would allow the City to assist 345 senior households to remain in their long-term
rent controlled homes with dignity. See Part II.G below.
Of course, every dollar we spend on rent subsidy is one less dollar we have to spend on new
affordable housing construction. And it is true that when the POD participants pass on or move
on, there is no new unit to help a new household. But at current costs, for $2 million per year the
City only can add fewer than four new affordable housing units at worst, and fewer than eight
new affordable housing units at best. For me the better public policy choice is to help many,
many more current Santa Monica seniors remain with dignity in their long-time homes for the
rest of their lives—even at the cost of some less affordable units in the future. Indeed, I
personally advocated for setting the maximum funding level at $6 million per year.
38547047.1 7
The real answer is to create more resources for both rent subsidy and for new construction, as
well as to find ways to lower the costs of each. The Housing Commission is committed to
continuing to work to provide City Council with ideas to accomplish these goals.
Two Commissioners disagreed with this recommendation, and therefore voted no.
Commissioner Buchanan stated for the record: “My no vote is not because I do not think that the
POD program is a priority goal overall, but I do not think that it is a program that should be
funded by the Housing Trust Fund and so that’s the reason for my no vote.”
Vice-Chair Hilton stated for the record: “The Housing Commission should continue to review
the Preserving Our Diversity (POD) pilot rental subsidy program, approve a program expansion
from 22 to 60-66 participants with associated costs not to exceed $500,000 annually, that POD’s
total budget and cost effectiveness be evaluated each year in a public report, and that any POD
budget increase should consider the financial impact on our Trust Fund and our production
requirement successes.” Vice-Chair Hilton also stated for the record at a prior meeting:
“Preserving Our Diversity (POD) is an ongoing budget; $2 Million a year in the first year and in
successive years is excessive and poses challenges to our Trust Fund's health and the Trust
Fund's contribution to production.”
Vice-Chair Hilton further amplified his views in a July 18, 2018 letter to City Council. In that
letter he suggests that as early as 2022 the annual funds available for affordable housing will be
only $9-$11 million, and he expresses concern about spending $2 million of that limited sum on
the POD program. However, Vice Chair Hilton is assuming that Staff will spend all of the $140
million that will be available in the HTF from now through 2021 in just those three years. If one
assumes instead that Staff spends at a rate of $16 million per year (the amount available prior to
the dissolution of redevelopment during the Great Recession), existing and projected resources
can sustain spending at that rate through at least 2032. And if the City Council continues to keep
faith with the voters and continues to match the GS/GSH monies with other City monies, the
City can continue to spend at least $16 million per year thereafter. See Part II.E below.
38547047.1 8
The Staff report for this Item at page 8 states:
Expanding the POD pilot program from the current budget of $300,000 ($200,000
for cash assistance and $100,000 for administration), which serves 22 households,
to the proposed annual (assistance) budget of $2 million would represent a ten-
fold increase in the size of the program. Staff has concerns that this commitment
may be premature despite the initially promising results of the test. The POD
program is a 14-month pilot which began in November 2017 and an assessment of
its effectiveness will not be completed until late 2018. The assessment will
measure housing stability, impact on and increases in entitlement benefits, access
to local services, and wellbeing. Additionally, because the effect of the POD
program on participants’ federal, state, and county entitlement benefits is not yet
fully settled with the relevant governmental agencies, program expansion without
such resolution could create challenges for future participants. Pursuant to the
Housing Commission’s recommendation, prior to implementing any expansion of
the current pilot program, staff would prepare more detailed administrative
guidelines, estimate the administrative resources (eligibility qualification,
program administration, social service agency support, etc.) required to achieve
any expansion, and return to the Housing Commission and Council for direction.
An alternative to the recommendation would be to consider “expanding the pilot
as results warrant to as much as $2 million per year.”
The Housing Commission’s recommendation is simply that City Council set as a priority goal
the expansion of the POD program to a range that requires the expenditure of no more than $2
million of HTF funds per fiscal year. While there may still be lessons to be learned about how
best to structure an expanded program, completion of the pilot program is not necessary to
determine that expansion is a priority goal. It does not take completion of the pilot program to
know that it will greatly benefit severely a severely rent-burdened senior to go from less than
$300 per month in after rent income to cover every other expense of life to the over $700 per
month that the UCLA School of Public Health says is required to meet the basic needs of such a
senior living on the Westside of Los Angeles. As the Staff report acknowledges, the Housing
Commission recommendation already states that the expansion will not take place until a specific
plan for that expansion is developed, vetted and approved by City Council. But given the HUD
data regarding the more than six thousand very low and extremely low income Santa Monica
renter households paying more than 50% of their meagre incomes in rent, it is important for City
Council to send a strong signal that expansion of the POD program is a priority. See Part II.F.
Finally, some representatives of the landlord community dispute whether there is any need for
the POD program. In particular, they assert such a program is unnecessary because purportedly
38547047.1 9
few if any Santa Monica renters lost their homes in 2017 because they did not pay the rent. But
even if the asserted factual premise turns out to be true 2, it would not change the need for the
POD program. Every affordable housing program—from the City’s inclusionary housing
program, to the City’s housing trust fund guidelines, to the federal and state tax credit programs,
to the federal Section 8 program—seeks not only to provide a place for low income persons to
live, but also seeks to set the rent levels at sufficiently low levels that the benefited households
can afford the other necessities of life. No one can seriously dispute that the POD pilot program
participants (whose other assets, if any, were considered when determining their eligibility just
as they are in other affordable housing programs) had rents that did not permit them to afford the
other necessities of life. And if just one out of every twenty (5%) of the more than six thousand
severely rent burdened and extremely low or very low income Santa Monica renter households is
similarly situated, that alone would justify expansion of the POD program to $2 million per year.
c. “A priority goal of the Plan is to provide permanent housing in Santa Monica
for those among the population of homeless persons that the City Council determines the
City should take responsibility to permanently house in the City. This should include
“Santa Monicans” who are homeless. Subject to further refinement, this group is deemed
to include those persons on the Santa Monica Homeless Registry as of the date the Plan is
adopted who are not already in permanent housing. The City should look to leverage as
much as possible federal funds, State funds, County funds, other City funds, or private
funds, to accomplish this goal.”
The City should take responsibility for housing in Santa Monica some portion of the homeless
population currently in Santa Monica. City Council ultimately should determine who falls
within this group, and what type of permanent housing is appropriate and cost-effective.
At this point the Housing Commission recommends that City Council direct Staff that a priority
goal of the HTF plan for the 2013-2021 Housing Element cycle is to permanently house
2 The representatives of the landlord community purport to support this assertion based on the
claimed number of Santa Monica evictions for non-payment of rent. But not everyone forced out
of their homes by excessive rents leaves after (as opposed to before) a completed eviction action.
38547047.1 10
homeless “Santa Monicans”, leveraging as much as possible federal funds, State funds, County
funds, other City funds and private funds. Such leveraging is particularly appropriate because
both the County and the City actually will save money in other areas (healthcare costs, law
enforcement and criminal justice costs) by moving chronically homeless individuals into
permanent supportive housing. But the HTF also should play a part in solving this issue.
Subject to further refinement by City Council, the Housing Commission recommends that City
Council initially deem the individuals currently on the City’s service registry who are not
permanently housed already as such homeless “Santa Monicans”. Staff advises that this includes
51 individuals living in temporary housing and 44 individuals known to be unsheltered. It may
also include an additional 44 individuals whose status is unknown because the City has not had
contact with them in the last six months. See Part II.H below.
Subsequent to the Housing Commission’s deliberations, Santa Monicans for Renters’ Rights
recommended that homeless “Santa Monicans” include all homeless families with children living
in Santa Monica, and all homeless persons who work in Santa Monica. In my personal capacity
I now support this SMRR recommendation, particularly given the social science research
demonstrating that low income children obtain life-long benefits when they are raised in
communities like Santa Monica with excellent schools, services, and job opportunities.
d. “The remainder of the HTF funds spent each fiscal year should be used to
create new affordable housing units for seniors, for physically and mentally challenged
persons, for large families, and for small families (including individuals). Unless one or
more unusually advantageous opportunities dictate a different result, a goal of the Plan is
to provide roughly equal HTF funding support for affordable housing targeted to each of
these four populations over the life of the Plan. The equal funding support determination
shall take into account HTF funding committed during the entire lifetime of the 2013-2021
Housing Element, even if it occurred prior to the adoption of the Plan. The equal funding
support determination also shall take into account HTF funding committed to the POD
program (which is for senior housing) and to permanently housing Santa Monicans who
are homeless (who may be members of any of the four populations).”
38547047.1 11
The draft of the initial HTF plan provided by Staff to the Housing Commission identified the
four target populations discussed in this recommendation. Recognizing that the need for
affordable housing for each target population identified exceeds the City’s HTF resources, the
Housing Commission recommended that City Council direct Staff to adopt a roughly equal
prioritization over the course of the entire 2013-2021 Housing Element cycle. However, as with
the soft annual cap on entering into new spending commitments, the Housing Commission
recommended that this direction be subject to exception when a different result is dictated by
unusually advantageous opportunities.
Subsequent to the Housing Commission’s deliberations, Santa Monicans for Renters’ Rights
recommended instead that half of the HTF funds go to housing for families with children, with
the remaining half available for affordable housing for either seniors, for persons with mental or
physical challenges, or live-work space for artists (primarily on the ground floor). In my
personal capacity I now support this SMRR recommendation, particularly given the social
science research demonstrating that low income children obtain life-long benefits when they are
raised in communities like Santa Monica with excellent schools, services, and job opportunities.
e. “The City’s existing affordable housing programs generally provide the
highest preference to persons displaced without fault from their existing homes in Santa
Monica, and provide the next highest preference to persons who either already live in
Santa Monica or who work full-time in Santa Monica. The two goals of the Plan identified
in paragraphs #2 and #3 above, however, only serve persons who already live in Santa
Monica. The City recognizes that the daily efforts of low income workers are particularly
critical to the businesses (including hotels, restaurants, and retail stores) that generate the
sales and use taxes supporting the HTF through Measures GS and GSH, as well as the sales
and use taxes and transit occupancy taxes that fund a substantial portion of the City’s
budget. City staff therefore is directed to develop, in consultation with the Housing
Commission, a proposal to increase—to the extent it is necessary and feasible to do so in
order to maintain an overall equal preference for affordable housing opportunities in the
City—the preference in other HTF funded projects for low-income Santa Monica
workers.”
38547047.1 12
This recommendation speaks for itself. All Santa Monicans benefit greatly from the daily efforts
of low income workers that are particularly critical to the businesses (including hotels,
restaurants, and retail stores) that generate the sales and use taxes supporting the HTF through
Measures GS and GSH, as well as the sales and use taxes and transit occupancy taxes that fund a
substantial portion of the City’s budget. The Housing Commission recommends that City
Council acknowledge these workers in the initial HTF plan, and direct Staff and the Housing
Commission to take any necessary and feasible steps to assure they too continue to have an equal
preference to and continue to benefit from the City’s affordable housing programs as financed
through the HTF.
f. “City staff is directed to develop as soon as possible, in consultation with the
Planning and Housing Commissions, a proposal to adjust the AHPP program that applies
outside of the Downtown Community Plan. The proposal shall be based on a feasibility
study, and shall take into account past and projected future production of housing through
inclusionary zoning and HTF funded projects, as well as the quantified objectives in the
Housing Element and the requirements of Proposition R.”
While it is projected that the City will meet or exceed all of its other housing production goals
during the 2013-2021 Housing Element cycle, it is projected that only 25% of all new housing
completed during that time period will be affordable housing, rather than 30% as mandated by
Proposition R. While the lack of an HTF funding source for the first half of that time period
undoubtedly played a role, so too did the over-incentivization in the Affordable Housing
Production Program for developers to choose to provide a very small number of extremely low
income units in complete satisfaction of their inclusionary housing obligations.
The City Council remedied this issue in the Downtown Community Plan in July of 2017 based
on the HRA feasibility analysis. The Housing Commission previously has recommended that a
review take place of the AHPP outside the DCP, and the Housing Commission now recommends
that the City Council put into the initial HTF plan a direction to Staff to do so as soon as
possible. This is appropriate because one of the express purposes of the HTF planning process,
as stated in the HTF guidelines adopted by City Council in July 2017, is “to help assure . . . (2)
38547047.1 13
compliance with Prop R’s requirement that 30% of annual new housing production meet certain
affordability targets,”
II. SUPPORTING MATERIALS AND DATA
A. The HTF Planning Process And Its Intended Purposes
In 2017, the Housing Commission recommended to City Council that it amend the HTF
guidelines to include a planning process. The Housing Commission supported this
recommendation in its report to the City Council as follows:
While the Housing Element establishes certain overall quantified objectives for
affordable housing production, it does not establish clear guidance as to proper
uses of City affordable housing funding resources. The Housing Element is at a
very high level both as to the nature of the units to be produced, and as to the
mechanisms to assure their production. No objectives are established as to the
size of the units to be produced, the nature of the units (e.g., family, supportive,
senior), or their locations within the City. Moreover, no particular mechanism is
provided for tracking progress toward even these high-level goals, and for
adjusting City policies (both in terms of inclusionary units and expenditures of
City resources) as necessary to achieve these goals. Finally, there is no formal
mechanism for the public and the City Council to weigh in on spending priorities
on an ongoing basis .
Therefore, to help assure (1) compliance with the affordable housing production
goals set forth in the approved Housing Element, (2) compliance with Prop R’s
requirement that 30% of annual new housing production meet certain affordability
targets, (3) maximization of the return on scarce Housing Trust Fund monies, and
(4) robust opportunities for input on spending priorities by the City Council,
Housing Commission, and the public, the Housing Commission recommends the
inclusion within the Housing Trust Fund Guidelines of the following planning and
reporting process . . . .
In accordance with the recommendation of the Housing Commission, the City Council in July of
2017 adopted the proposed HTF planning process as follows:
Annual Reporting by the Housing Division
The City Manager shall prepare an initial proposed plan, called Housing Trust Funds
Plan (“Plan”), for affordable housing development in the City for the remaining
period covered by the current Housing Element (i.e., through 2021). The Plan shall be
made available online and the Housing Division shall conduct a 45-day public
comment period. A public meeting hosted by the Housing Commission shall be held
by the Housing Division between the 30th and 45th day of the public comment period.
Once the public comment period is completed, the Plan with any public comments
38547047.1 14
shall be submitted to the Housing Commission for review and recommendation to the
City Council for review and its approval. A Housing Trust Funds Plan shall be
prepared and adopted for each Housing Element cycle.
Thereafter, on an annual basis, the Housing Division shall prepare a report to the
Housing Commission for its review and recommendation for City Council approval.
The annual report shall include details on the following items:
(1) The source and amounts of funding for each Housing Trust Fund received
during the prior year;
(2) The amount and uses of funds, including the amount and source of funding
commitments issued, from each Housing Trust Fund during the prior year;
(3) The quantity and type of affordable housing made available for occupancy
during the prior year;
(4) The quantity and type of housing which exceeded or fell below the annual
production mandate of Proposition R during the prior year;
(5) Cumulative figures of source/amount of Housing Trust Funds, quantity/type of
affordable housing made available, and exceeded/missed Proposition R
requirement, covering the Housing Element period, as well as comparison with the
Quantified Objectives set forth in the Housing Element; and
(6) A comparison of the actual cumulative affordable housing production covering
the period of the adopted Housing Trust Funds Plan with the goals set forth in that
plan.
Once approved by City Council, both reports shall be posted on the Housing
Division’s website.
B. Progress To Date Toward Meeting The Quantified Objectives Of The
Current Housing Element And Toward Satisfying SB35 Requirements
1. Progress Toward Meeting The Current Housing Element’s Quantified
Objectives
The State-approved Housing Element contains “Quantified Objectives”. Staff advises that (1) a
unit counts toward satisfying the Quantified Objective once a building permit is issued, and (2)
at present, all of the units on the chart below are projected to obtain building permits within the
current Housing Element period:
38547047.1 15
Staff also advises that there are 47 additional units in the two new construction projects that
recently obtained HTF loans. These 47 additional units include 4 Extremely Low Income units,
32 Very Low Income units, and 11 Low Income units. A representative of CCSM—the non-
profit developer for these two projects—believes these projects likely will be completed by the
end of the current Housing Element.
Staff further advises that there are additional projects on Lincoln Boulevard that are converting
to development review permits, and a project on 5th Street that is seeking administrative
approval, that also are projected at present to obtain building permits during the current Housing
Element. Staff did not provide data regarding the number and affordability mix of units in these
projects.
The foregoing data supports the following conclusions:
1. Without doing anything more, Santa Monica should produce during this Housing
Element more than three times its Quantified Objective for market rate units;
2. Without doing anything more, Santa Monica should produce during this Housing
Element more than its overall Quantified Objective for deed-restricted affordable housing units.
However, the unit mix will deviate from the Quantified Objectives in that it will include many
more extremely-low and very-low income units than called for in the Housing Element, but
considerably fewer low income units.
2. Progress Toward Meeting SB 35 Requirements
SB 35 provides for tracking by the State of California of progress by each local jurisdiction
toward the Quantified Objectives in its Housing Element. Failure to attain sufficient progress
toward market rate housing triggers streamlining of projects that meet the higher of 10%
affordable housing or whatever is required by local inclusionary housing law. Failure to attain
sufficient progress toward both low and very low income housing (which subsumes extremely
38547047.1 16
low housing as well) also triggers streamlining for projects that have 50% affordable housing
units. Streamlining consists of administrative approval and no parking requirements.
Santa Monica is one of only 12 local jurisdictions in California that are not subject to any SB 35
streamlining. Staff advises that they do not anticipate that Santa Monica will face any SB 35
streamlining during this Housing Element.
C. Progress To Date Toward Meeting Proposition R
Proposition R, adopted by Santa Monica voters, amended the City Charter to require that the
City Council act to ensure that at least 30% of all new housing constructed each year be
affordable to and permanently occupied by persons earning 100% or less of the Los Angeles
County median income, and that at least half of that that 30% (i.e., 15% of all new housing) be
affordable to and permanently occupied by persons earning 60% or less. A unit is counted under
Proposition R when construction is complete (not when a building permit is issued).
Staff advises that the following chart reflects the status of compliance with Proposition R during
the current Housing Element through FY 2016/2017:
Staff further has advised that (1) all of the units that are “in construction” per Table 4 above
should be completed by the end of this Housing Element, and (2) the current best estimate is that
the following units identified as “approved” per Table 4 above likely will completed in by the
end of this Housing Element:
43 Extremely Low-Income
39 Very Low-Income
11 Low-Income
26 Moderate-Income
804 Above Moderate (Market)
923 Total
Table 5
Proposition R Tracking
Multifamily Housing Production
Low/Mod-Income
Year
FY 2013/2014
FY 2014/2015
FY 2015/2016
FY 2016/2017
%
Affordable
56%
19%
21%
13%
Total:
Housing
Surplus/Deficit ( )
118
(17)
(16)
(18)
67
38547047.1 17
And, as noted above, a representative of CCSM believes that the two new construction projects
recently approved for HTF loans likely will be completed by the end of the current Housing
Element, thereby yielding an additional 4 Extremely Low Income units, 32 Very Low Income
units, and 11 Low Income units.
Combining all of this data, it appears that if nothing more is done, Santa Monica will fall 132
affordable units below the 30% affordable housing mandate of Proposition R on an aggregate
basis during the current Housing Element. This means only 25% of all new housing completed
during the 2013-2021 Housing Element will be some form of affordable housing, rather than the
required 30%. However, more than 15% of the new housing completed will be affordable to
those earning 60% or less of the Los Angeles County median income, thereby satisfying one of
the two requirements of Proposition R.
D. Projects With HTF Funding Commitments
Staff advises the following:
1. The first project to which the HTF committed funds during the 2013-2021 Housing
Element cycle was an acquisition / rehabilitation project. The commitment was entered into in
June 2015. The cost to the HTF was $550,000 per unit, and $305,556 per bedroom.
2. The next project to which the HTF committed funds during the 2013-2021 Housing
Element cycle was the following project (with the commitment issued in 2016):
3. After the City Council adopted new Housing Trust Fund guidelines in July 2017, and
prior to the Housing Commission deliberations on the initial HTF plan, the HTF has approved
loans for three additional projects as follows:
38547047.1 18
E. Funds Available In The Redevelopment Replacement Housing Trust Fund
Staff advises the following:
1. As of the Housing Commissions deliberations in May of 2018, the HTF had
approximately $57 million that is not currently committed to approved projects. This includes
the following one-time RDA loan repayments already received by the City:
3. The following additional one-time RDA loan repayments were anticipated at the time of
the Housing Commission deliberations (and the first of these has now been received):
4. Staff estimates that Measures GS/GSH will provide $8-$9 million per fiscal year on a
going forward basis.
38547047.1 19
5. Staff estimates that boomerang funds will provide $1.2 million per fiscal year on a going
forward basis.
This data supports the following conclusions:
1. By either providing to date or committing ~$71.2 million in expected one-time RDA loan
repayments and ~$1.2 million annually in “boomerang” funds, the City Council has matched
from City funds the first nine or ten years of projected GS/GSH monies.
2. The currently available funds, together with the projected future revenues outlined above,
should be sufficient by themselves to sustain $16 million in annual Housing Trust Fund
expenditures for at least the next fifteen years.
Fiscal Yr. Initial Bal. RDA Ln. Repay. GSH/Boomerang End Bal. (-$16 mil.)
2018-19 $57 million $15.7 million $9.2 million (min.) $65.9 million
2019-20 $65.9 million $10.7 million $9.2 million (min.) $69.8 million
2020-21 $69.8 million $14.3 million $9.2 million (min.) $77.3 million
2021-22 $77.3 million $8.7 million $9.2 million (min.) $79.2 million
2022-23 $79.2 million $0 $9.2 million (min.) $72.4 million
2023-24 $72.4 million $0 $9.2 million (min.) $65.6 million
2024-25 $65.6 million $0 $9.2 million (min.) $58.8 million
2025-26 $58.8 million $0 $9.2 million (min.) $52.0 million
2026-27 $52.0 million $0 $9.2 million (min.) $45.2 million
2027-28 $45.2 million $0 $9.2 million (min.) $38.4 million
2028-29 $38.4 million $0 $9.2 million (min.) $31.6 million
2029-30 $31.6 million $0 $9.2 million (min.) $24.8 million
2030-31 $24.8 million $0 $9.2 million (min.) $18.0 million
2031-32 $18.0 million $0 $9.2 million (min.) $11.2 million
2032-33 $11.2 million $0 $9.2 million (min.) $5.4 million
F. HUD Data Regarding Severely Rent Burdened Santa Monica Renter
Households
Staff advises that the following is the most recent available HUD data regarding the estimated
number of severely rent burdened Santa Monica renter households:
38547047.1 20
G. The Preserve Our Diversity (“POD”) Pilot Program
Staff advises:
1. The following criteria were applied to participants in the POD pilot program:
Threshold Eligibility Criteria for the POD pilot (household must meet all criteria below):
1. Household submitted a complete Renter Needs Survey by July 18, 2016;
2. Household participated in follow-up interviews;
3. Head of household is a senior aged 62 or older;
4. Household has occupied current Santa Monica rent-controlled apartment since
before January 1, 2000;
5. Household’s apartment must not be deed-restricted affordable housing of any
kind, including:
� Properties purchased, rehabilitated, or constructed with City funding;
� Apartments subject to the Affordable Housing Production Program;
� Federally assisted properties; and
� Los Angeles County-assisted or owned affordable housing properties.
6. Renter Needs Survey initially indicated that the household income was equal to
or less than 30 percent of area median income (Extremely low income) and
household final income verification confirms it is no more than 50 percent area
median income (Low Income);
7. Household is not currently participating in, or previously terminated from, any
Santa Monica Housing Authority rent-subsidy programs;
8. No household members convicted of violent crime which occurred within the last
5 years, or who are registered sex offenders; and
9. Household income documentation indicates that the household is in need of the
38547047.1 21
subsidy (i.e. earning less than the approved Basic Needs Budget), pursuant to
the income and asset determinations and verifications outlined in Section III of
the Guidelines, including but not limited to:
� Earned and unearned income for all household members from all sources,
such as employment, cash-equivalent government benefits, and family
support; and
� Imputed income for assets calculated at a rate of 10 percent annually (the
formula for the City’s Affordable Housing Production Program).
3. The following data describes the average after rent income, the POD subsidy, and the
basic needs budget for the 22 POD pilot program senior renter households:
H. Santa Monica Homeless Services Registry
Staff advises: