Editor's note: This item was pulled from the July 25 agenda at the request of the Commission.
The Santa Monica Housing Commission wants more residents to own their homes and their overall strategy is to de-emphasize rentals in the City’s housing process.
In a report that will be presented to Council on Tuesday, the Commission outlines a variety of ideas for encouraging homeownership. Specifically, they want to shift incentives from building rental units to encouraging construction of units that will be for sale and at the same time, explore ways to convert existing rental units to owner-occupied units.
All of the Commission’s proposals are targeted at creating housing for lower-income residents and that would be available for sale below current market rates.
Build more homes:
The Commission argues affordable for-sale housing is entirely possible given the existence of affordable materials and modern design elements. It is recommending a reallocation of some existing housing resources away from the construction of rental buildings toward sellable housing.
"Large areas of land in Santa Monica are bought by nonprofits using city loans which are subsequently forgiven," said the report. "This permanent land transfer to third parties at little or no cost is currently used almost exclusively for affordable rental housing. Diverting some of the city’s resources to affordable homeownership projects in lieu of affordable rental housing projects would create a better and more diversified investment in Santa Monica residents, neighborhoods, and community."
Aside from land, the Commission says fees and planning policies are biased against new for-sale housing and the disparity in municipal support discourages construction of lower priced units in favor of rentals.
The report says a homeownership assistance program should be funded through a combination of local, state and federal housing trust funds that could provide interest free loans or a forgivable down payment system. In addition, the Commission says dedicated support is needed to help understand the homebuying process.
"Buying a home for the first time is daunting," said the report. "Navigating affordable homeownership assistance programs is even more complex, difficult, and time consuming, particularly for first time home buyers. The Housing Commission recommends that the city establish a home purchase assistance office that will encourage homeownership, help prospective buyers navigate the numerous and varied purchase assistance programs, monitor ownership programs, and seek new ways to help Santa Monica residents, particularly those with low or moderate incomes, buy a home."
Converting rentals:
Santa Monica has both rent controlled and market rate units, but in either case, they argue a nonprofit or government agency should purchase entire buildings at a time and then offer the units for sale to residents. The sales would be voluntary and the purchasing agency would remain as a proportional owner until all units were sold. Under the Commission proposal there would be no time limit attached to the ability to purchase units and buyers would be required to live in their units for some time before considering a resale.
The report says converting rent controlled units is a real possibility as evidenced by the original Tenant Ownership Rights Charter Amendment (TORCA) that offered a way to convert Rent Controlled units to ownership during the early 1980s.
TORCA was not widely successful with only seven percent of eligible tenants buying units and the Commission said the original program had several shortcomings including potentially tense negotiation between tenants and their landlords and an incentive to push out renters to make market rate sales. However, they said a revised version of the policy that accounts for past failings should be considered.
"Furthermore, when occupied buildings that are subject to rent control are placed on the market, their sale prices are frequently lower than their replacement cost because rent control laws prevent new building owners from charging existing tenants prevailing market rents. This presents a unique opportunity for nonprofit parties to purchase discounted multifamily housing in order to facilitate tenants’ optional subsequent affordable purchase of their units…," said the report.
To ensure affordable prices, the Commission recommends deed restrictions on the sales targeting specific income levels and using a qualification system to filter buyers.
"First, staff should conduct research to determine the legal, financial, and logistical feasibility of working with existing and/or new housing nonprofit partners to convert 100% affordable rental housing to a homeownership model whereby each tenant would be given the option to purchase their unit," said the report. "Next, the city should engage directly with existing nonprofit housing providers currently managing, constructing, or planning 100% affordable rental properties in Santa Monica to gauge their willingness to consider such transitions and discuss how they could be orchestrated."
The Commission said rental housing is important, but not the only solution the housing crunch.
"While affordable rental housing is a key component of plans to remedy California’s and Santa Monica’s affordable housing crisis, relegating low and moderate income residents solely to rental housing perpetuates and exacerbates other economic and societal disparities," said the report. "These disparities are increasingly evident in Santa Monica given the high cost of living, and the city must act swiftly and decisively to mitigate and more fully address them."
The proposal will be discussed in detail at the July 25 meeting of the City Council. The meeting will be held in City Hall, 1685 Main Street and closed session begins at 5:30 p.m.
