New housing developments of 11 or more units are required to make at least 15% of those units permanently priced significantly below market value. This applies apartments, condos, townhomes, single family homes – any form of dwelling unit.
Developers usually don’t like building them, so they take advantage of a loophole. Instead of creating affordable units, they are allowed to offer a payment to the City as a condition of making more or all of the units available at market rate. This fee goes into a special fund that is held with the City, that is supposed to eventually be used in some manner to build affordable units in the future. There are a number of problems with this arrangement that directly lead to the inadequate affordable inventory.
Not enough units have been built
This is the obvious primary problem. Many people who work in Livermore cannot live there due to insufficient income. A variety of essential occupations fall into this trap, such as teachers, healthcare workers, first responders, and the list goes on.
Affordable projects take too long
As the fees are collected over time, the challenge becomes how to spend them. The typical scenario is that City staff and the Council should be proactive in getting them applied toward actual, shovel-ready projects in what would hopefully be a sufficiently rapid pace. The expensive market rate projects can be ready to be occupied in as little as a year or two, but the affordable projects can languish for decades. When they do get built, they tend to be 100% below market concentrated compounds. It has long been known that such a configuration is not the best way to welcome people with diverse income levels into the fabric of the city.
“Inclusionary Housing” is superior to affordable housing projects
Like most communities, Livermore practices inclusionary zoning policies (also known as inclusionary housing policies and IZ policies). They aim to create affordable housing units by encouraging or requiring housing developers seeking to construct new market-rate units to set aside 15% of the units as affordable for moderate-income to low-income tenants or homeowners. IZ policies are designed to encourage new housing developers to build affordable homes in market-rate housing areas with the goal of creating communities with diverse income levels.
Here’s how it works in Livermore
Inclusionary zoning can be mandatory, voluntary, or a combination. Livermore requires new constructions of 11 units or more to set aside 15% of dwelling units for affordable housing programs. Developers often claim that the project won’t be feasible for a variety of reasons and may offer to pay their way out of building as many, or any. Sometimes several factors interact to either increase or decrease the number of units built such as: density bonuses, expedited approvals, fee waivers, and subsidies.
Benefits of Inclusionary vs. Concentrated Affordable Zoning
- Increased supply of affordable housing: Inclusionary zoning policies help increase the amount of affordable housing available to lower-income and moderate-income households. IZ also offers a path to meeting federal fair housing standards set by the Department of Housing and Urban Development.
- Greater opportunity for low-income households: As housing prices soar, inclusionary zoning ordinances aim to help low-income renters and homeowners afford to live in areas with greater access to employment, schools, and public transportation.
- Decrease economic and racial segregation: Inclusionary zoning can help create a more economically and racially diverse city by enabling people to live throughout Livermore and not just relegated to parts of town deemed less desirable.
- Healthier: Living in a mixed-income community can have a positive effect on our residents’ health, such as a reduction in stress and overall improved mental health.
Solutions
Fees are too low
With developers so commonly choosing to buy their way out of building the units, clearly the fee structure is inadequate. The city council has the sole authority to adjust the fee.
The usual standard in the US is for the fee to be adequate to construct each of the unbuilt units at a future date. A case in point is the Lassen Road Townhomes, where the developer (WestGate Ventures) was allowed to avoid building 14 townhomes for a mere $776,000. In no version of reality could a future unit be built for $55,000. This has been a common condition in recent years, and fees need to be substantially higher.
Systemic Dysfunction
City Staff and Council are prone to run on autopilot when it comes to developers. Projects get proposed Planning Department, then run through Planning Commission with a lot of negotiations and modifications. By the time it gets to Council, it is easier to say “yes” than it is to challenge the process for adequacy, as was not done with Lassen Road Townhomes. Council needs to demand much more to ensure a better affordable mix within future housing developments.