California has been relatively successful in getting developers to build low-income housing in recent years, but a new law aims to do the same for the middle market.
Signed by Gov. Gavin Newsom, AB 1287 was introduced in mid-October, which allows a developer to build more market-rate units if it includes middle-income housing. Based on the area’s current median income, that would be housing reserved for individual San Diegans earning $77,200 to $98,100 a year.
It won’t be clear until the law goes into effect in January if developers will go for it. There have been several well-intentioned housing bills in the Golden State over the past decade that sought to encourage residential development but failed or were largely ignored.
“One thing we’ve done well, not that we’ve solved the problem, is to encourage housing construction in the low-income sector,” said Assemblyman David Alvarez (D-San Diego). “The missing middle is always a conundrum.”
Alvarez’s bill comes at a time when California lawmakers are focusing new attention on the middle of the market, sometimes referred to as the “middle left.” The thinking is that the state has many expensive houses for the rich, and there are many incentives for housing for the poorest residents, but the middle of the market is left out.
The city, and to a lesser extent, the state, has successfully increased the supply of low-income, subsidized apartments by requiring developers to include them in apartment complexes (or pay large fees) and allowing them to build more density if they are included. low-income units, although the density program usually receives less attention.
A notable recent example of a bonus density, which has resulted in several unsuccessful lawsuits, is the luxury apartment complex at 525 Olive in Bankers Hill. Developer Greystar was able to add an additional four stories and 18 apartments for low-income renters. With the new law, a project like 525 Olive can be built even higher if it also includes middle-income apartments.
However, moderate-income units can only be low-income; a certain number of low-income units have been built to prevent AB 1287 from weakening or destroying the existing system that provides incentives to developers to build apartments for low-income renters. A developer must build 15 percent of its low-income units before it can generate moderate-income bonuses.
“We don’t want to sacrifice any tools that help low-income households,” Alvarez said.
An example is the recently completed Los Patios complex in Barrio Logan. It was zoned for 15 units, but the developer added three apartments for very low-income renters (for those making $48,250 a year and below) and got a 50 percent discount. increased density, which corresponds to 22 units in total.
Now, Los Patios can add three more average units of income and get another 50 percent bonus to get 30 units (the bonus percentages are rounded up). Assuming the six additional units are in the base units, that means 15 additional units at market rate for the developer.the
Housing analyst Gary London, of London Moeder Advisors, said he doubts the new law will create more housing, especially units priced for moderate incomes. He said the requirement that a developer must first build very low-income units prevents many from taking advantage of the law. Like most low-income bonus programs across the state, the apartments must remain subsidized for 55 years, making it difficult for some developers to recoup the costs.
London said that if the law created bonuses only for modest incomes, it would probably still apply. California has a long list of laws passed in recent years with low-income housing requirements linked to efforts to build more homes that have not yet been widely used by developers.
Alvarez said there is a body of evidence, including a detailed report from the pro-housing density group Circulate San Diego, that shows a substantial increase in developers applying for housing programs. bonus low income once the overall density is increased. He argued that it’s easy to create hypothetical scenarios—like, would a developer build more low-income housing if this modest bonus wasn’t there, or would there be more housing without the low-income housing we need in the first place?—but the reality on the ground is very different.
According to his experience as a member of the city council of San Diego, and Sacramento, is it still difficult to get a large amount of low-income houses to be built, or any moderate income, even with many incentives.
“Hypothetically, anyone can build anything, but can they?” he said.
In 2016, the San Diego City Council increased its bonus to 50 percent if the developer included 15 percent low-income units. At the time, the state program was a 35 percent bonus if developers included 11 percent low-income units in their buildings. Before the change, the law was almost never used. Circulate Srarelyich, who used city and public housing rights data, said there were 545 bonus units created under the program in its first 20 months. It also marks a nearly 500 percent increase in developers applying for the program.
Alvarez said that the new law should not be judged in advance and it takes time for people to check its effectiveness.
“I think it’s a tool,” he said, “and I hope that can call the attention of developers and say, ‘Hey, it can take off and we’re doing something good for the community.’ The truth is that we will see if it is effective or not. We will not know until at least a couple of years of implementation, and I will be the first to say that I do not guarantee that it will build houses.
Laws addressing density wouldn’t be necessary if California didn’t have a “nightmarish patchwork” of density restrictions that sometimes change from block to block, said Will Moore, director of policy and counsel for the pro-housing group Circulate San Diego.
In Oceanside, the City Council passed a law two weeks ago to limit density in its downtown to a maximum of 86 units per acre.
“California’s growth restriction is bad for everyone,” Moore said. “When you say you can’t build apartment buildings downtown, well, where are people supposed to live? A lot of these anti-housing arguments just make people wish they didn’t exist.”
A major part of AB 1287 was changed before it reached the governor: The original draft allowed the buildings to take over the authority of the California Coastal Commission, which has its own statewide height restrictions. Moore said it was a “strategic retreat” from Circulate San Diego, which helped write the bill, and Alvarez to exclude the coastal zone. According to him, there are other efforts to push back the Coastal Commission, so it’s another day.
When local business and economic leaders were asked last year about increasing low-income housing requirements in San Diego, many suggested zoning changes would be more effective than requiring those developers to build affordable housing. However, that can be politically difficult. An effort this year to change single-family zoning in much of San Diego, under optional statewide legislation Senate Bill 10, failed under heavy community opposition.
There is a stipulation in AB 1287 that allows a developer to build for-sale affordable housing as part of the bonus program. However, even the authors of the bill say that it is unlikely to be used for condos because of statewide defective legislation that has prevented the growth of condos for most of this century.
The middle-income housing law is just one of several new statewide laws the governor recently signed that aims to increase housing afforaimlity. Another bill from Alvarez, AB 1449, would exempt 100 percent of subsidized housing projects from the California Environmental Quality Act, or CEQA, which can often delay a project for years.
Many affordable housing projects are infill developments, going into an urban area where there was something else before. A study from the San Francisco-based law firm Holland & Knight said 80 percent of CEQA cases are directed at infill projects.