KEN EDWARDS CENTER ¬ó The Housing Commission Thursday expressed support to eliminate a discount on affordable housing fees awarded to developers who choose to build in some residential and commercial areas.

The fee applies to developers who build apartment projects or condominium projects and do not want to build affordable housing into the project or in an off-site location.

However, up until now, City Hall has given developers a discount on the fees they pay to produce affordable housing when they build either in commercial zones or on vacant properties in residential zones.

That can equate to major savings because the rate is cut by 50 percent for multi-family housing built in commercial districts and 25 percent in residential.

Those savings come on top of the fact that it’s already considered cheaper to pay the in-lieu fee for affordable housing than actually build it into the project or in an off-site location.

Though the goal was to increase the amount of housing production where housing didn’t already exist, it didn’t work out that way, said James Kemper, a housing administrator with City Hall.

Developers didn’t seem to be taking the discount into account when they built, since over half of development was taking place on properties that already had multi-family housing.

“We were giving them an undeserved discount and not collecting much-needed money that’s otherwise due from the developer,” Kemper said.

The fees equate to $27.35 per square foot in an apartment development and $31.94 per square foot for a condominium development.

City Hall uses the money to finance affordable housing production in Santa Monica.

Using market rate developments to help pay for lower-income housing makes sense because the more expensive homes tend to bring in high-income tenants or buyers who then need services provided by lower-income individuals, Kemper said.

Money to build affordable housing or leverage loans for affordable housing is in tight supply.

Gov. Jerry Brown and the Legislature created bills that ended institutions called redevelopment agencies in California. Those entities took property taxes and used them to fix infrastructure, build parks and remove blight.

However, 20 percent of their money was required to go toward affordable housing. Santa Monica’s Redevelopment Agency contributed between 75 and 80 percent of the money used to create affordable housing in the city, Kemper said.

With that gone, leaving any money on the table seems like a bad idea, particularly when Santa Monica is struggling to meet its goals for affordable housing production.

According to a staff report, City Hall did not meet a requirement set down by Santa Monica voters in 1990 that 30 percent of all multi-family housing built between July 1, 2010 and June 30, 2011 be affordable.

While that could change in coming years when major projects like the Village, with its 160 affordable units, come online, the loss of redevelopment money raises concern that Santa Monica will not have the money to meet its obligations.

However, raising fees on private development may not be the best way to ensure the creation of affordable housing, said Mike Winn, president and CEO of the California Building Industry Association, a lobbying organization for builders in the state.

“It’s generally ironic,” Winn said. “As cities try to balance budgets or offset costs on the backs of new construction in related fees or new charges, it ends up being unproductive to redevelopment policy.”

New fees often get passed to the consumer, although the weak housing market may buffer buyers from the full effects of those charges, Winn said.

A “compromise solution” that the industry is backing is a bill proposed by state Sen. Mark DeSaulnier (D-San Ramon) that would levy a $75 fee on real estate documents to provide a permanent source for affordable housing.

The bill is estimated to create several hundred million dollars every year for affordable housing development.

It’s one thing that builders and affordable housing advocates agree on, although they look to the private sector to cough up support as well.

There are certainly limits to the amount a municipality can charge in affordable housing fees, said Brian Augusta, a legislative advocate for the Western Center on Law & Poverty, but “we haven’t hit it yet.”

“As we look at the continued need for affordable housing in this state, it’s fair to look at all sectors to meet that need,” Augusta said. “We create low-wage jobs, we need low-wage housing for low-wage workers to live in.”

The City Council will take up the issue on June 26.

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