Developers Not Discouraged by Inclusionary Housing Ordinance Amendment

The increase in the city’s inclusionary housing requirement is paying off so far, according to a city staff report contained in the Planning Commission’s agenda.

The Pasadena City Council unanimously voted in December 2019 to raise the inclusionary housing requirement for developers to set aside affordable units on all new projects from 15% to 20%. 

At that point, there were seven development projects in the entitlement pipeline that became affected by the increase. This increase resulted in at least 17 net additional affordable units being required from those seven projects.

According to the report, the elimination of trade downs further increases the net gain of affordable units.

“In evaluating the efficacy of the updated inclusionary requirements, it is important to note that so far all of the projects that were in the pipeline and were required to increase their inclusionary set-asides are still proceeding through the development process,” the report states. “In other words, the increase thus far has not discouraged housing projects from being built.”

The report will be presented to the Planning Commission at 4:30 p.m. Wednesday as part of a one-year review of the amended ordinance and affordable housing concession menu and provide recommendations for further amendments.

The City Council amended the ordinance after expressing concerns about the increasing use of concessions and incentives by developers under the state density bonus law (SDBL) to exceed the established height, scale, and massing regulations that had been codified in the city’s Zoning Code. While SDBL requires developers to provide a certain percentage of affordable units in their projects in order to qualify for concessions, the number of units required was seen as disproportionate to the impact of these concessions, especially since the city’s existing IHO already required affordable units to be included with new multi-family residential developments. 

As a result, the City Council directed staff to make recommendations that would achieve the dual goals of increasing affordable housing production while encouraging new development projects to be designed at a scale and mass that better fits within the expected character of various neighborhoods.

The original ordinance applied to developments of 10 units or more and called for developers to set aside 15% of the proposed units as affordable for very low- and moderate-income people. Developers not wanting to set aside units can still pay an in-lieu fee which goes into the city’s own housing fund. Builders can also donate land worth the value of the fee.

The menu established a set of concessions that would be available to projects utilizing a state density bonus without the requirement to obtain an affordable housing concession permit (AHCP), provided that the project complied with the inclusionary requirements by providing the affordable units on-site.

Upon approval of the ordinance, the City Council also directed staff to return after one year to provide an update on the ordinance and make further recommendations as appropriate in order to achieve the combined goals of increased affordable housing production and preservation of an appropriate scale of development throughout the city. 

“Based on this review, it appears that the amendments have been working relatively well and as intended,” the report states. “They have not slowed or stopped production of housing in the city, have not caused a sudden influx of more affordable housing concession permit projects with increased height, and in some cases, have been enough of an incentive for projects to choose concessions on the menu rather than seeking additional relief through SDBL [state’s density bonus law.]”