Santa Monica will look for ongoing, sustainable and possibly voter approved revenue sources to build future affordable housing units.
The City Council held a study session at their Aug. 25 meeting to evaluate the available funding sources for affordable housing and attempt to define the community’s need for housing.
Council repeatedly praised the staff report presented by Housing and Economic Development Administration Director Andy Agle. The report outlined the current status of affordable housing citywide and provided a roadmap for possible revenue ideas.
Santa Monica has multiple kinds of housing that could be labeled “affordable” and the City charter mandates 30 percent of new construction should be accessible to low income residents. According to the report, the City has exceeded the goals of Proposition R, with 40 percent of all new housing built over the past 20 years being deed-restricted for occupancy by low- and moderate-income households.
The most common housing type considered in the affordable housing discussion is rent controlled apartments. Units built prior to 1979 are governed by the City’s rent control rules. Annual rent increases are set by the elected Rent Control Board and tenants in rent control units have additional protections.
According to the report, rent control establishes a stable housing situation for those in controlled units, however, changes to state law have undermined the long-term effectiveness of rent control. When tenants leave a rent-controlled unit, the rent now resets to market rate. Those high rents, combined with an increasing number of rent-controlled units leaving the market have taken many once affordable units off the market.
“At the current rate, the long-term rent-controlled stock will have mostly disappeared within the next 18 to 20 years,” said the staff report.
Aside from their dwindling supply, rent control is not income-based. While rent controlled unit are stable, they do not necessarily provide housing for those that can’t afford market rate units.
Deed restricted affordable housing is the only real remaining option for affordable units. To qualify for deed restricted housing, tenants must make a percentage of the area’s average income. That percentage varies based on the specific requirements of the unit and the size of the household. A family of four would be categorized as Extremely Low if it made 30 percent of the average ($25,600), Low at 50 percent ($42,700), Low at 80 percent ($68,300) and moderate at 120 percent ($77,750).
Deed restricted units can be newly built or rehabbed and funded though public funds or by private developers as part of a development agreement. The City has about 4,500 deed-restricted units.
Aside from deed-restricted units, the City also participates in voucher programs to offset the cost of tent. However, staff said the effectiveness of those programs is in decline due to the rapidly rising cost of rent in the city.
According to the staff report, 50 percent of Santa Monica households (23,387) have incomes that would qualify a family of four as “low-to-moderate income” while the City has only 16,178 units at those price points.
Since 1998, the City has lost half of its low-to-moderate housing stock with only 33 percent of units currently renting at that level.
Aside from those in the low-income categories, the City is also pricing out moderate-income residents with average rents exceeding the income levels of those making more than the average income.
State regulators have said the City should produce 974 affordable units by 2021 (of that figure, 490 have already been approved).
With varying definitions of “need” the report also discussed funding options.
Santa Monica used to fund a variety of programs via its redevelopment agency. However, when voters eliminated that funding source, the City lost up to 90 percent of available funds for low-income housing.
While some state, federal and county resources are available, the council debated its local options including cuts to City services, increased allocations to affordable housing when possible, general obligation bonds and additional taxes (on hotels, sales, utilities, property sales and/or parking).
Councilman Winterer provided the blueprint for direction to staff.
He said he was open to potential adjustment of the City’s reserves with an understanding that economic forces could prevent too much cash from leaving those accounts, exploration of allocations above the rate of inflation, a ballot measure that included language to preserve existing buildings, exploring tax increases (including a hotel tax option, shared sales tax with the school district, utility tax, expansion of the parking tax and a possible tax related to real estate). He said he was not in favor of a parcel tax or general obligation bonds.
Winterer also said the City should be more proactive in broadcasting it’s actions to safeguard existing housing.
“As we go forward we need to be emphasizing that message that we do do a lot of work to preserve the existing housing stock in the City, keep existing Santa Monicans in place without development, because affordable housing has been conflated with development,” he said.
Mayor Kevin McKeown and the majority of councilmembers backed Winterer’s priority list.
McKeown said the discussion would be ongoing and more information is needed.
“In a study session like this, as much as I wish we were likely to come up with the answer tonight, that’s highly unlikely, we’ll be lucky if we ask the right questions,” he said.
“We have to have compelling data as to where we’re going, why were’ going there, how we intend to get there and why these are the best ways to do it.”