CITY HALL — Those who develop commercial properties could soon be on the hook for affordable housing.

The City Council Tuesday directed its staff to begin work on a study that would set the parameters for a fee on commercial development to support the production of affordable housing.

City staff recommended exploring a fee after Santa Monica’s Redevelopment Agency was dissolved in February by the state, depriving City Hall of almost 75 percent of its funding for affordable housing.

If affordable housing remains a priority in Santa Monica, it will need another source of stable funding, said Andy Agle, director of Housing and Economic Development.

“It’s important that we keep an eye on what’s happening in Sacramento, and if that’s not successful, are there sources we can identify locally to continue to fund housing?” he said, referring to two bills currently in the State Assembly and Senate which could preserve some money for affordable housing.

Local funds for affordable housing are dependent on private developers and the kinds of projects they’re looking to build in Santa Monica.

Developers interested in building housing projects in the city already have to pay an “affordable housing production fee,” as do those who build office space. Additionally, development agreements give city officials the ability to add affordable housing requirements to specific projects at their leisure.

The policy does not apply to other developments, including hotels, retail or creative office space.

Those are the developments that would be targeted by the proposed fee.

The nexus study is required by law to establish that the fee in question would be used on something connected to the project and that the requirement was reasonable.

Even hotel and retail projects create a demand for affordable housing, said James Kemper, housing administrator with City Hall.

“It’s from the notion that you can develop land, but there’s going to be these impacts. You have an obligation to offset them, but not to the point that it makes their land undevelopable,” Kemper said.

City Hall will search for firms capable of completing the study, and hopefully come back to the City Council with a contract for the study sometime in May, said City Manager Rod Gould.

It’s time that developers did their part to support Santa Monica’s stated goals to house workers and businesses’ customers within the city, said City Councilmember Kevin McKeown.

“Going forward, we are going to have to expect more of those who want to build in Santa Monica,” McKeown wrote in an e-mail Thursday.

Paying for housing was one consideration — what housing to build in the future was another.

According to the staff report, Santa Monica has become a community of smaller, graying households.

The median age increased over the last decade from 37.9 years to 40.4 years, considerably higher than the 34.8 median age seen in Los Angeles County as a whole in 2010, and the average household size is 1.8 people.

Correspondingly, 82 percent of the over 50,000 multifamily units in the city are composed of one and two-bedroom units.

“What’s interesting when we look at this, is that it’s a chicken and egg issue,” Agle said. “Do we have small households because we have small units, or small units because people drawn to Santa Monica have small households?”

The department opened its affordable housing waiting list to new applications in mid-2011. Over 33,000 applications flooded in, and 78 percent of those were for one and two-bedroom households at extremely low or very low-income levels.

At the same time, an analysis of the market revealed that units for moderate-income individuals cost less than the upper rent ceiling proscribed by City Hall.

That indicates that the market is producing moderate-income housing without any encouragement from public policy, Kemper said.

Tuesday represented the first step in what could evolve into a new focus to produce housing fit for very low-income households and multiunit apartments fit to attract and retain young families.

“We’ve been serving moderate income people who have not needed the help as much as we thought they did,” said McKeown, going on to say that new policy should focus on the “destitute.”

Several council members agreed that it may be time to explore “social engineering,” or creating the kind of housing that could make Santa Monica affordable to small families.

“We need to build a community of the future where people will be able to live here and not get forced out of the city when they have to find affordable housing for their families to grow,” said City Councilmember Bob Holbrook.

There are inherent challenges for governments trying to incentivize one kind of housing over another, but the attempt demonstrates Santa Monica’s core values, Kemper said.

“It’s great to live in a community where the council and community put such a priority on the diversity of the population and mechanics that get you there,” Kemper said.

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