Over the next decade, Santa Monica and other cities in California will have to rethink how they produce affordable housing.
The state is set to require communities across the state to produce more market-rate and affordable housing than ever before to try to make a dent in a housing shortage that has sent the price of rents and mortgages soaring and thrown thousands of people onto the streets. Housing for low- and moderate-income renters will be particularly tough to produce in the quantities that the state needs, and municipalities will need to find new ways to fund housing projects and make them cheaper and easier to build.
Currently, Santa Monica requires for-profit developers to include a certain amount of affordable units in market-rate housing projects and provides funding for nonprofit developers like Community Corporation of Santa Monica to construct 100% affordable buildings.
But with a forthcoming state mandate to add 6,000 affordable units by 2029, the city is beginning to revise its affordable housing strategy. Here’s a guide to the regulations, programs and funding sources you’ll need to know to follow one of the defining issues of the 2020s.
Affordable Housing Production Program (AHPP): Santa Monica’s AHPP was created in 1998 to ensure that 30% of all new housing in the city be affordable to low- and moderate-income households, as mandated by the 1990 local ballot measure Proposition R. 38% of the more than 5,000 units built since the law went into effect have been affordable, but in recent years the city has struggled to meet the 30% requirement. The city’s rent-controlled housing stock is not included in the AHPP.
Inclusionary zoning: The AHPP provides an inclusionary zoning plan in which developers are required to include a certain proportion of affordable units in market-rate projects. Although the proportion varies by the project’s size and location, developers can typically choose to incorporate a smaller number of units for extremely- and very low-income households or a larger number of units for low- and moderate-income households.
Developers can also choose to build the affordable units in a separate building near the market-rate project, pay an in-lieu fee that the city uses to produce affordable housing or donate land to the city.
Area median income (AMI): The median income of all working residents in a Metropolitan Statistical Area calculated by the U.S. Department of Housing and Urban Development that is used to determine income eligibility limits for affordable housing. The 2019 median family income for the Los Angeles-Long Beach-Glendale area is $73,100.
Santa Monica provides affordable housing at four income levels: extremely low, very low, low and moderate.
Extremely low-income households earn up to 30% of the area median income, very low-income households earn up to 50%, low-income households earn up to 80% and moderate-income households earn up to 120%.
The calculation varies based on household size. In Santa Monica, an individual qualifies as extremely low-income if they earn up to $21,950 and as moderate-income if they earn up to $61,400. A family of four would be considered extremely low-income at $31,300 per year and moderate-income at $87,700.
Housing Element: All California cities are required to create eight-year plans to meet their affordable housing needs as quantified by the Regional Housing Needs Assessment, an analysis of how many new homes a city needs based on its projected employment and population growth. The upcoming 2021-2029 Housing Element attempts to course-correct for decades of stagnant housing production by requiring job- and transit-rich cities to zone for more housing.
Deed restrictions: A developer must stipulate on the deed to a property with affordable units that the units may only be rented to households of a certain income level for a number of years. In Santa Monica, deed restrictions on affordable housing must remain in place for at least 55 years.
Housing Trust Fund: A city of Santa Monica fund that commits $15 to $18 million per year to the production and preservation of affordable housing. The fund is sustained by developers contributing in-lieu fees, redevelopment loan repayments and ongoing revenue from Measure GSH, a half a percent sales tax to support affordable housing that local voters approved in 2016.
Commercial linkage fee: A fee developers have paid since 2015 to offset the need for affordable housing generated by new commercial development, which currently totals about half a million dollars.
Low-Income Housing Tax Credit (LIHCT): Affordable developers fund projects for households earning up to 60% AMI by selling tax benefits awarded by state housing agencies to private investors. The $9 billion funding program dates back to 1986 and is the largest federal affordable housing program.
Discretionary review: In Santa Monica, development taller than two stories must go through a discretionary review process that includes public hearings at the Planning Commission and the Architectural Review Board. 100% affordable housing projects with fewer than 50 units are exempt from discretionary review.
Ministerial review: City planning staff processes and approves a project without bringing it to the Planning Commission. The Planning Commission has recommended that all 100% affordable projects go through ministerial review, which requires less time and expense than discretionary review.