Council to Vote on Significant Changes to Inclusionary Zoning Requirements, Allowances

New ordinances would offer developers a menu of incentives, meant to increase affordable housing

Published : Friday, August 16, 2019 | 5:13 AM

The Pasadena City Council will vote Monday on zoning changes that would increase incentives and requirements for developers to build affordable housing units as part of their projects.

The new changes recommended by the Planning Department would amend the Pasadena Municipal Code to raise the inclusionary percentage requirement from 15 percent to 20 percent, eliminate “trade-downs,” and create an affordable housing concession menu for eligible density bonus projects.

Housing incentives can also include increasing height limits on new developments in exchange for affordable units in new developments.

The Planning Commission also recommended that the City Council approve amendments that provide a 25 percent inclusionary housing component, making such projects exempt from the requirement to obtain an Affordable Housing Concession Permit.

The Planning Commission recommended that the City Council allow eligible projects to select from the following options for new developments:

An increase in maximum allowable height up to 12 feet beyond current standards over no more than 60 percent of the building footprint; Increase in the maximum allowable floor area ratio up to 0.5 beyond current standards; reduction of side or rear setbacks by up to 50 percent, provided that the proposed setback is not adjacent to a single-family residential zoning district or an eligible or designated historic resource; the elimination of loading requirements; and the reduction of minimum parking requirements by up to 50 percent if the project site is located within the Central District Transit Oriented Development area, or within a one-half mile radius of the Metro Fillmore or Allen Gold Line stations.

According to the Planning Department staff report, “both the City Council and the community have expressed concerns regarding higher-intensity development projects that have been recently completed or are currently under review, especially those that received affordable housing concession permits for additional height and/or density in exchange for providing affordable housing units.”

One concern expressed in the report is that development projects have been approved that “are inconsistent with the scale and character of surrounding neighborhoods and have gone beyond what was anticipated in the General Plan,” while including affordable housing production.

As a result of these concerns, the City Council recently directed staff to create policy changes “to address the imbalance between increased development intensity and inadequate housing affordability, without rendering housing development infeasible in the City.”

The City of Pasadena first adopted its current Inclusionary Housing Ordinance (IHO) in 2001.

According to the staff report, the IHO requires projects with 1O or more units to set aside 15 percent of those units as affordable to moderate and low-income households. In rental projects, the requirement consists of 1O percent low-income and 5 percent moderate-income units, while for-sale projects require 15 percent moderate-income units. The IHO allows developers to substitute units at lower affordability levels at lower inclusionary rates.

For example, according to the staff report, one very low-income unit would be equivalent to 1.5 low-income units, or 2 moderate-income units. This provision is also referred to as “trading down,” and while it results in units with deeper levels of affordability, it also reduces the total number of affordable units produced. The IHO also provides various alternatives for projects to comply, including paying an in-lieu fee, providing units off-site, or dedicating land to the City, said the report.

But critics of changing the current policies say that adjusted in-lieu fees and raising inclusionary numbers could result in less new housing being built overall.

“The biggest challenge to the creation of affordable housing is funding,” says Paul Little, president of the Pasadena Chamber of Commerce. According to Little, when California eliminated redevelopment under Governor Jerry Brown, it also eliminated the single most significant financing mechanism available for the creation of below-market-rate housing.

Added Little, “Pasadena originally passed the inclusionary housing requirements more than fifteen years ago and it has been successful at increasing the affordable housing stock in the city,” but cautioned, “If the fees or the number of units required, make a project financially infeasible, nothing will be built.”

Little called the situation “a delicate balance” that is also very susceptible to economic forces.

“A downturn in the economy could mean that inclusionary requirements make any housing construction unable to turn a profit,” he said.

Longtime housing activist Jill Shook counters that developers can save thousands by shortening the approval time, and getting units built sooner to begin to receive income from the units.

“Quicker approvals help save lots of money for developers,” said Shook Thursday. “This, in exchange for more affordable units, plus fewer parking spaces is also significant.”

According to Shook, an underground parking space can cost a developer $33,000 and two floors below can be $55,000.

“Just a few less parking spaces is a huge boon for a developer in exchange for affordable units,” she added. “Pasadena has trimmed the residential impact fee from $20,000 to $900 for all affordable units. This incentive will remain, but these additional benefits make it worth it financially to include affordable units.”

Ed Washatka of Pasadenans Organizing for Progress (POP) agrees in principle with the idea of providing incentives to developers in order to increase housing stock.

“We have no problems with incentivizing developers,” he told Pasadena Now Thursday.

“In exchange for the incentives,” said Washatka, “we just want the City to make sure that 25% of the units are affordable and spread across a range of Very Low, Low, and Moderate-income families making between $36,000 and $88,000 per year.”

Washatka continued, “By incentives, we suggest shortening the approval times from 18-24 months to 12 months — this would have the benefit of reducing the time cost of capital to developers. Other incentives might be reducing parking space requirements which can save $33,000 to $55,000 per space or adding a slight increase in density within State mandated guidelines.

California also has a State Density Bonus Law (SDBL), SB 1818, in place since 1979, and in recent years, it has been updated to make it more difficult for local government to deny density bonus projects.

According to the staff report, the SDBL is based on the principle that absent incentives, requirements, or subsidies, the private market will not produce units at affordability levels below market-rate. SDBL is structured so that a project “is entitled to additional density beyond local standards based on the amount of affordable housing included in the project, as well as the level of affordability of those units.”

A project, for example, that includes a minimum of five percent very low-income units or 10 percent low-income units qualifies for a 20 percent density bonus, while a project that includes 10 percent moderate-income units qualifies for a density bonus of five percent. The maximum increase provided under the current SDBL is 35 percent, and to achieve this maximum, a project must include at least 11 percent very low-income units, 20 percent low-income units, or 40 percent moderate­ income units.

The Council will meet again after a summer recess next Monday, August 19, at 6:30 p.m. in City Council chambers. Room S249, City Hall, 100 Garfield Avenue, Pasadena.