SR 04-09-2019 8A
City Council
Report
City Council Meeting: April 9, 2019
Agenda Item: 8.A
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To: Mayor and City Council
From: Andy Agle, Director, Housing and Economic Development, Housing Division
Subject: Affordable Housing on City-Owned Land
Recommended Action
Staff recommends that the City Council:
1. Authorize issuance of a request for proposals for the development of affordable
housing on City-owned property at 1318 Fourth Street, and
2. Authorize staff to continue to explore similar opportunities on other City-owned
properties.
Summary
For over four decades, Santa Monica residents and voters have supported the
preservation and production of affordable housing as a core local value. As market
pressures and changes in state law have affected the affordability of housing in Santa
Monica, the community has continued to identify the urgency and need. Reflecting
community sentiment, in 2015, Council identified Maintaining an Inclusive and Diverse
Community as one of its strategic goals, and in 2019, Council identified Affordability as
a Framework Priority. Creating more affordable housing is a key element to maintaining
economic diversity and affordability in Santa Monica.
The great need for affordable housing is accompanied by the reality that producing
affordable housing can be very expensive. A major driver of the expense is the cost of
land. Using City-owned land for the creation of affordable housing presents an
opportunity to significantly reduce the City’s cost associated with financing housing
production and thereby increase the number of households than can be assisted.
This report recommends that the City solicit proposals for the development of affordable
housing on City-owned land at 1318 Fourth Street, currently home to Downtown Public
Parking Structure No. 3. Because of the age and condition of that structure, the City
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has long anticipated demolition of the parking structure and specifically designed
Parking Structure No. 6 to replace the parking capacity that would be lost. While the
existing structure is currently heavily utilized, overall parking occupancy in the
downtown public parking structures is declining. If current users shift to available
capacity in the downtown’s other structures, significant impact on parking availability
and revenues is not anticipated.
Given the long-term plans for demolition, the parking structure has not undergone the
seismic retrofitting that has been completed for most downtown parking structures and
suffers from chronic maintenance issues, particularly of its elevators.
Finally, given the deep need for additional affordable housing resources, staff
recommends that the Council authorize continued evaluation of other City-owned
properties as potential future affordable housing opportunities.
Background
The Housing Commission continues to consider opportunities to enhance the City’s
efforts to support affordable housing. The considerations extend beyond efforts to
increase funding for affordable housing by identifying the need to reduce the cost of
creating affordable housing so that limited housing funds can be stretched further.
The cost-efficiency measures that the Commission has identified and begun to assess
include opportunities to reduce construction costs, zoning changes that could support
affordable housing development, and use of City-owned properties to construct
affordable housing. Creating affordable housing on City-owned land offers the
possibility of reducing or eliminating one of the largest expenses in the creation of
affordable housing: the cost of land.
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Pursuant to a Commission request, staff from Information Services and Housing and
Economic Development (HED) created an interactive mapping tool that provides
information about City-owned properties. At the October 2018 Housing Commission
meeting, staff shared a matrix of the City-owned properties and discussed them with the
Commission (Attachment A)
At the November 2018 Housing Commission meeting (Attachment B), staff shared more
information about each property, including aerial photos, zoning information, housing
potential, current use, key considerations, and recomme ndations. Following discussion,
the Housing Commission prioritized two sites for near-term consideration, 1318 Fourth
Street and 612 Colorado Avenue. Compared to the larger list considered by the
Commission, the two sites appeared to face fewer obstacles to consideration for
affordable housing. The Commission also recognized that Council approval of requests
for proposals (RFPs) on the sites would represent the initial step in the process, and
that the City would have to evaluate the quality of affordable housing proposals for the
sites before committing to creating housing at the sites. The Commission also signaled
that prioritizing the two sites should not remove the other sites from consideration. For
the other sites, efforts will need to continue with respect to assessing and potentially
remediating barriers, where feasible, for use as affordable housing.
At their February 2019 meeting, the Housing Commission considered more refined
information (Attachment C) regarding the two sites. Between the Housing Commission
meetings in November 2018 and February 2019, staff completed additional due
diligence regarding the 612 Colorado Avenue site, a parking lot at the southwest corner
of Seventh Street and Colorado within the Big Blue Bus yard. The due diligence
identified a significant obstacle to moving forward in the near term relat ed to the Big
Blue Bus’ plan to convert its fleet to 100 percent electric by 2030. Due to the current
fleet site and the need to fuel compressed-natural-gas vehicles overnight, the existing
Big Blue Bus yard lacks additional capacity to accommodate the significant new
infrastructure that will be required to charge and maintain e lectric buses. The Big Blue
Bus is embarking on a planning process for integrating electric buses and the
associated infrastructure into the Big Blue Bus yard. As the Big Blue Bus will need to
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service both electric and gas-powered buses for many years, there is a strong likelihood
that additional space will need to be dedicated to bus operations. As a result, HED staff
recommended that the issuance of a request for proposals for the site be delayed until
there is more clarity regarding the spatial needs associated with electric buses.
The Housing Commission recommended (see Attachment D) that the City Council
authorize issuance of an RFP for affordable housing at 1318 Fourth Street with the
following goals for the housing:
Affordable housing at the site should include a major commitment to permanent
supportive housing;
The development should maximize affordable housing and the cost-effectiveness
of producing affordable housing;
The development team must possess strong qualifications in the development
and operation of affordable housing, though non -profit or for-profit development
team members may be considered;
The development must support the Housing Trust Fund Plan of moving people
experiencing homelessness into permanent housing;
The development should further the City’s goals with respect to the voter-
approved Proposition R, which mandates that 30 percent of all multifamily
housing built in Santa Monica should be affordable to low- and moderate-income
households.
With respect to 612 Colorado, the Housing Commission recommended that:
consideration of affordable housing should be a high priority for the site;
considerations should include combined use of the site for bus operations and
affordable housing, as well as consideration of alternative locations for the Big
Blue Bus yard; and
considerations for the site should include the opportunity to create a permanent
shelter for people experiencing homelessness.
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Discussion
One of the primary benefits of using City-owned land is the preservation of limited
housing trust funds that would typically be invested in purchasing privately owned land.
To gauge the potential savings, staff looked at five pipeline affordable housing
developments that are currently either in predevelopment as a result of a City loan
commitment or in the application stage, undergoing review by the City. The data shows
that while there is considerable variation among the developments, there is a range that
could be considered for future projects (broken out by unit and by bedroom (BR):
CHART 1
PROPOSED AFFORDABLE NEW CONSTRUCTION (in 000s)
Pipeline
Affordable
Housing
Developments
Land Cost
(City Funded)
Per
City Loan for
Soft + Hard Costs
Per
Tax Credit Equity
Per
Permanent
Bank Loan
Per
Percent
Funded
by City
Unit BR Unit BR Unit BR Unit BR
1 $200 $195 $ 71 $ 69 $383 $373 0 0 41%
2 $136 $133 $139 $136 $325 $318 0 0 46%
3 $142 $ 80 $116 $ 65 $434 $243 0 0 37%
4 $218 $123 $ 55 $ 31 $432 $245 $39 $22 36%
5 $174 $ 97 $ 73 $ 41 $427 $238 $24 $13 35%
Average $174 $126 $ 91 $ 68 $400 $283 $31 $18 39%
Most of the developments above are too small to qualify for permanent ban k loans (e.g.,
35-40 apartments), reflecting that the projected operating income is too modest to
service a loan or that the overall amount of the loan does not justify the financial
feasibility process by a bank.
The five developments reflect land acquisition costs in the range of approximately
$135,000 to $215,000 per residence (with an average of approximately $175,000) and
approximately $80,000 to $195,000 per bedroom (with an average of approximately
$125,000). As is typical for City loans, the land acquisition costs are expected to be
funded entirely by housing trust funds.
For each development, the City is also expected to fund some portion of the
construction costs, ranging from approximately $55,000 to $140,000 per residence and
$30,000 to $135,000 per bedroom. All five developments are expected to successfully
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leverage City funding with a greater amount of outside funding, primarily Low-Income-
Housing Tax Credits.
Using costs from the five new construction developments can help inform the potential
savings from using City-owned sites for affordable housing development. The following
provides more detailed information regarding the City-owned property at 1318 Fourth
Street for which the Housing Commission recommended issuance of an RFP for
affordable housing.
1318 Fourth Street
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The 30,000-square-foot site at 1318 Fourth Street is currently the location of Downtown
Public Parking Structure No. 3. Since the early 2000s, the City has planned to demolish
the parking structure. When Parking Structure No. 6 was rebuilt, the number of parking
spaces in Parking Structure No. 3 was more than replaced in order to allow for its
demolition. Given its small size, the parking structure experiences above-average
occupancy within the downtown system. However, overall parking occupancy in the
downtown public parking structures has been declining. As a result, there is ample
parking availability to accommodate motorists who would otherwise use Parking
Structure No. 3 and a significant impact on parking revenues is not anticipated.
For over a decade, the City worked with two different companies to develop a
contemporary cinema at the site. Both companies withdrew from negotiations for the
site and the cinema discussions have now m ostly ended. Given the long-term plans for
demolition, the parking structure has not undergone the seismic retrofitting that has
been completed for most downtown parking structures. As the parking structure is
nearing the end of its useful life and incidents related to its age are occurring with
greater frequency, staff anticipates that the structure’s demolition may be considered as
part of the FY 19/20 Capital Improvement Budget. If the demolition does not occur
within the near term, a significant investment in seismic retrofitting would be required.
The site is located within the Bayside Conservation District of the Downtown Community
Plan, which allows for affordable housing up to 70 feet in height with a maximum floor -
to-area ratio of 4.0. Using simple floor-area-ratio calculations, staff projects that the site
could accommodate approximately 100 to 150 affordable residences, depending on the
design and target population(s). The street-facing ground floor could house non-
residential uses that help activate the sidewalk and contribute to the sense of safety in
the area. Ground-floor space could also house activities and uses that support the
Downtown and the larger community but have otherwise been priced out of commercial
storefronts Downtown.
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Using the range of land acquisition costs of the five proposed developments above, an
estimated $13,600,000 to $32,700,000 of housing trust funds could be saved by using
the City-owned site, as identified below.
CHART 2
POTENTIAL COST SAVINGS WITHOUT LAND ACQUISITION COSTS
LAND ACQUISITION COSTS
PER RESIDENCE
LOW END HIGH END AVERAGE
RESIDENCES $136,000 $218,000 $174,000
100 $13,600,000 $21,800,000 $17,400,000
150 $20,400,000 $32,700,000 $26,100,000
With an average City investment of $265,000 per residence ($174,000 for land plus
$91,000 for construction, as shown in Chart 1 above), the land-acquisition savings could
be used to create another 51 ($13.6 million / $265,000) to 123 ($32.7 million / $265,000)
long-term affordable residences. The cost savings related to acquiring equivalent land
Downtown is even greater, given the cost of land Downtown.
Because a parking structure currently exists at 1318 Fourth Street, developing
affordable housing at the site would require some investment to make the site suitable
for development. The primary cost is demolishing the parking structure. In addition,
some remediation of the soils would likely be necessary, given the likely presence of
some hydrocarbons associated with vehicle fuel. Environmen tal studies associated with
previous proposals on the site did not anticipate significant remediation costs. Previous
cost estimates for demolition and remediation were in the range of $3 to $4 million. The
demolition process would include de-commissioning of parking operations, including
harvesting the parking-revenue equipment, re-orientation of the electronic wayfinding
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and parking-guidance equipment, and communicating with short- and long-term users of
the parking structure.
In addition, there would likely be a need for some housing trust fund assistance for
construction costs on the site. The chart below illustrates the expected range of
potential city assistance based on the five proposed developments.
CHART 3
POTENTIAL CITY ASSISTANCE FOR SOFT AND HARD COSTS
ADDITIONAL CITY ASSISTANCE
PER RESIDENCE
LOW END HIGH END AVERAGE
RESIDENCES $55,000 $139,000 $91,000
100 $5,500,000 $13,900,000 $9,100,000
150 $8,250,000 $20,850,000 $13,650,000
The actual amount of additional City assistance at the site likely will be greater than for
the five pipeline developments, primarily because the scale of the affordable housing
development could make it less competitive for nine-percent tax credits. All five pipeline
developments have received a nine-percent allocation or intend to apply for nine-
percent tax credits. A development at the site could be competitive for four-percent tax
credits, which are considerably less valuable, and possibly Affordable Housing and
Sustainable Communities funding or SB2 (Building Homes and Jobs Act) funding from
the State of California.
Staff has initiated conceptual consideration of a long-term, permanent replacement for
the City-owned Santa Monica Shelter (Samoshel). Given that Samoshel was created
approximately 25 years ago as a temporary facility, staff believes that consideration
should be given to creating a permanent replacement facility. The City -owned site at
1318 Fourth Street is one of the locations that could be considered, though staff from a
variety of departments have raised concerns about the location’s suitability for a shelter.
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In the coming months, staff proposes to engage the Council and community regarding
the feasibility of and potential sites for a permanent replacement of the shelter.
Given the potential for substantial savings and efficiency in the use of limited housing
trust funds, staff seeks direction to issue a request for proposals for affordable housing
development at 1318 Fourth Street. The RFP process would allow the City to consider
in greater detail the opportunities related to the number of apartments that could be
built, expected costs, and financing opportunities. The RFP process would also allow
the City to facilitate a more informed community dialogue regarding the opportunities at
the site. Pursuant to receipt of a viable proposal, staff would return to the Housing
Commission and Council with recommendations related to an affordable housing
development team and proposal, as well as conceptual terms of a long-term lease of
City land and a potential Housing Trust Fund loan for affordable housing development.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action as a result of the recommended
action. Following receipt and review of proposals, staff would return to Council with
recommendations related to potential selection of an affordable housing development
team, disposition of City land, and Housing Trust Fund loan.
Prepared By: Andy Agle, Director
Approved
Forwarded to Council
Attachments:
A. October 2018 Housing Commission Handout
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B. November 2018 Housing Commission Staff Report (Web Link)
C. February 2019 Housing Commission Staff Report (Web Link)
D. Housing Commission Minutes
E. Written Comments
Housing Commission Meeting: October 18, 2018
Item 4-B
1
Potential for Affordable Housing on City-Owned Properties
The following is a subset list of City-owned properties, categorized by existing use, with information about potential
affordable housing development scope, and staff recommendation regarding prioritization for exploring development
potential:
Existing Use Location Address Lot Size
(sqft)
Development
Potential /
Approx. # of
Potential
Apartments
Staff
Recommended
Prioritization
Surface
[employee]
parking lot
Colorado,
between 6th &
7th Street
n/a 52,765
~ 211,000 sqft.
bldg. envelope;
211+ apts.
1
Fire Station #1 7th & Colorado 1444 7th St. 14,994
~ 60,000 sqft.
bldg. envelope;
60+ apts.
1
Mostly surface
parking lot; small
portion improved
with office
building
Gateway
Master Plan
Area (4th/5th &
Colorado)
1636 5th Street
402 Colorado
80,066
~ 320,000 sqft.
bldg. envelope;
320+ apts.
2
Housing Commission Meeting: October 18, 2018
Item 4-B
2
Existing Use Location Address Lot Size
(sqft)
Development
Potential /
Approx. # of
Potential
Apartments
Staff
Recommended
Prioritization
Surface parking
lots
Ocean Park
area
Neilson Ave.,
south of
Hollister, and
between Hill &
Kinney
102,220 ~ 100 apts. 2
Parking Structure
#3 4th & Arizona 1318 4th St. 29,988
~ 120,000 sqft.
bldg. envelope;
120+ apts.
2
Surface parking
lot 14th & Wilshire 1211-1217 14th
St. 15,006 12 apts. 3
Housing Commission Meeting: October 18, 2018
Item 4-B
3
Existing Use Location Address Lot Size
(sqft)
Development
Potential /
Approx. # of
Potential
Apartments
Staff
Recommended
Prioritization
Animal shelter 9th & Olympic 1640 9th St. 23,893
~ 54,000 sqft.;
general
multifamily
housing not
permitted in
this zone;
supportive
housing
allowed, with a
50-unit max
3
Surface parking
lot
Euclid &
Wilshire 1217 Euclid St. 14,993 12 apts. 3
City TV 19th & Olympic 1654 19th St. 8,010
n/a; Industrial
Conservation
zone –
minimum lot
size = 15,000
Not
recommended
unless zoning
changes
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EXCERPT FROM MINUTES OF FEBRUARY 21, 2019 HOUSING COMMISSION
MEETTING:
Item 5A:
Motion by Chair Soloff, seconded by Commissioner Bloch to recommend
that City Council (1) adopt the proposal of staff to issue an RFP for
affordable housing (as defined by Proposition R) at the 1318 Fourth Street
site, (2) direct that the RFP (a) include that one goal is that there be a
major commitment to providing permanent supportive housing, (b) include
that a second goal is to obtain as much affordable housing as possible with
as little additional contribution from the City, (c) include proper
requirements for developer skill levels and track record and financial
solvency, but not include any limit on whether the developer is non-profit or
for-profit, and (d) include provisions to assure that both the land and the
units themselves be permanently used for the affordable housing purposes,
and (3) direct staff when evaluating the responses to the RFP and
otherwise to look for opportunities to fulfill the goal in the approved Housing
Trust Fund plan to get homeless Santa Monicans into permanent housing
as quickly as possible.
Motion by Chair Soloff seconded by Commissioner Gerwitz to recommend
that City Council at this time make affordable housing a high priority for the
site plan at 612 Colorado Avenue, and that considerations include both the
possibility of dual use of the site with the Big Blue Bus as well as the
possibility of moving the Big Blue Bus to other City-owned land and this site
being used exclusively for affordable housing with ground floor retail. It is
further recommended by the Commission that consideration be given to the
suggestion of staff that this may be an appropriate site for replacement of
Samoshel.
Item 8-A
04/09/19
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