EDITOR’S NOTE: An interactive version of this article is available here.
SOLANA BEACH — Coming into the last year of an eight-year planning period, the city of Solana Beach, like other North County municipalities, has made little progress toward reaching its affordable housing production targets for lower-income households.
Through its cyclical Regional Housing Needs Assessment, or RHNA, the state government assigns targets in four household income categories —very-low, low, moderate, and above-moderate income. The current cycle covers the period from 2013 to 2021, ending next April.
By the close of 2019, Solana Beach had issued permits for only about 20% of its overall objective, according to an annual progress report council received at its May 27 meeting. Since the cycle began in 2013, both Solana Beach and Del Mar haven’t permitted any units in the very-low-income category.
While Solana Beach’s progress is the worst among them, all North County cities — and most cities statewide — stand little chance of achieving most of next year’s goals.
None of the eight North County cities has achieved as much as one-third of its very-low, low and moderate-income objectives (with one exception), according to their 2019 progress reports.
As of the state’s compilation of 2018 local progress reports (the latest available), cities statewide had achieved, on average, 24% of their very-low income targets; 55% of low income; 77% of moderate income; and 370% of above-moderate income.
Above-moderate income projects stand out because they are generally affordable at market rates as long as enough land is made available, said Rick Rust, a consultant, during the Carlsbad Housing Element Advisory Committee’s May 27 meeting.
In contrast, low and very-low income projects require public subsidy or other regulatory incentives in order to become financially sustainable.
Following each RHNA, cities undertake lengthy planning processes to identify viable sites for their RHNA targets. Why, then, is housing production coming up so short across the board?
Among other contributing factors, a significant reason is that cities’ housing elements aren’t enforceable.
For example, the Pearl apartment complex was a recently aborted affordable housing project on a city-owned parking lot in Solana Beach. In 2013, the city identified the lot as viable and had already associated it with the Pearl in its state-certified Housing Element.
And yet, it never broke ground. The approval process dragged on for four years, the cost ballooned to $1.1 million per unit and project financing eventually fell apart, as reported by the Los Angeles Times.
The city couldn’t control some of the project’s cost-drivers, such as rising construction costs, labor at union wages, and the time and resources to litigate a lawsuit brought by a neighboring homeowners’ association.
But it could control others, at least to a certain extent, such as the amount of required parking (expensive to build), the size of the commercial component (potential rents from businesses help secure upfront financing), and overall density (to spread costs over more rent generating apartments).
“It’s very simple,” said Ginger Hitzke, the Pearl’s San Marcos based developer, during an April 15 interview on CALmatters’ “Gimme Shelter” podcast. “It’s a very small project. … I have all the same types of costs [architectural design, code compliance, sewer access fees, etc.] that every other [larger] apartment complex would, it’s just divided by ten. Smaller [project size] does not mean less expensive. Smaller means more expensive.”
“It’s definitely a complex question as to whether any site [at all] in a Housing Element is viable,” Hitzke told The Coast News in a June 6 email. “Viability is driven by so many factors. The most viable sites are the ones that have the fewest negative factors that are relative at the time you are determining feasibility.”
“New tools [since the last RHNA] that require jurisdictions to expedite approvals may be useful in preventing a similar escalation in costs for future projects,” California Department of Housing and Community Development spokeswoman Alicia Murillo said in a June 8 email.
“[Regulatory hurdles] bear the brunt of the burden for the inability to meet the [RHNA] figures,” said John Allen, a San Diego based developer. “With discretionary review [from local governments] on relatively small and environmentally insignificant projects, we’re basically killing feasibility …. It’s too expensive, it takes too long. Factoring in the additional expense and cost of capital when underwriting projects at the initial stage, developers can’t make new projects’ pencil.”
Allen mentioned, as an example, one of his company’s current building efforts in Carlsbad. Just like the Pearl, Allen’s project is proposed on a site specifically identified by the city to meet RHNA targets.
Despite approval recommendations from both the planning commission and city staff, in addition to an exemption from the California Environmental Quality Act (CEQA), an appeal to the city council “[the project] got redirected back to city staff for additional environmental studies,” Allen said.
That was a year ago. Allen expects to bring the revised project to its second planning commission hearing in August.
“That project is just kind of a microcosm of the current system in a lot of cities,” he said.