Developers Poised for Battle Against Inclusionary Zoning

By HOWARD FINE
Staff Reporter

After being on the sidelines for years, the debate over how to create more affordable housing in Los Angeles has taken center stage in local politics.

Led by L.A. Mayor James Hahn and several members of the City Council, Los Angeles has created one of the nation's largest affordable housing trust funds and has enacted policies to encourage residential reuse of old buildings and structures on commercial corridors.

So severe is the region's affordable housing crisis that all this has been accomplished with little opposition, except for the difficulty of finding money in tough budget times to bring the trust fund up to the desired $100 million.

Now, though, the battle has been joined over the biggest step the city has yet considered: requiring developers to set aside portions of their projects for affordable housing.

Council members Eric Garcetti and Ed Reyes are leading the charge for this so-called inclusionary zoning ordinance, arguing that voluntary measures to encourage developers to build affordable housing units have fallen woefully short. Garcetti chairs the council's economic development committee, while Reyes chairs the powerful planning and land use committee.

Building industry officials and business groups have vigorously opposed the ordinance, saying that affordable set-asides will make projects financially unviable.

Whatever emerges could determine the course of the debate for decades to come.

"Reyes and Garcetti have been able to get this on the city's agenda for the first time because of their positions," said Fernando Guerra, director of the Center for the Study of Los Angeles at Loyola Marymount University. "The council is instinctively inclined to be supportive, but they are wary of unintended consequences. And that's where they are being lobbied hard by developers."

In the middle is Hahn, who has said he wants to take additional steps to encourage the building of affordable homes but does not currently support the proposed inclusionary zoning ordinance. The Garcetti-Reyes proposal now calls for 12 percent of all new for-rent construction and 20 percent of all for-sale construction to be set aside as affordable housing (though Garcetti said last week these targets are still in flux).

Builder concessions

Unlike in past years, when affordable housing proposals never even made it to the council, the debate has now shifted from whether there will be an inclusionary ordinance to what its provisions will include.

Ray Pearl, executive director of the Building Industry Association of Southern California, acknowledged that the ordinance would probably pass. He and other developers are seeking incentives to offset the financial impact.

Why has the political climate changed?

Two years ago, the Center for the Study of Los Angeles concluded that housing had risen to second place on the list of top concerns of residents, after traffic. During the 1990s, housing typically ranked in seventh or eighth place.

"The rise in home prices has become a crisis that's screaming for a response," said Guerra. "More than half of L.A. residents believe their children won't be able to own a home in the neighborhood they are growing up in."

That may be one of the reasons why the long-stalled campaign by affordable housing advocates to create a housing trust fund finally found a friendly ear during the 2001 mayoral race.

"When he was running for office, Hahn agreed to the trust fund, which was unprecedented for a local politician," said Jan Breidenbach, executive director of the Southern California Association for Nonprofit Housing.

Hahn announced the creation of the trust fund in 2002, promising it would reach $100 million by this year. Despite a severe budget squeeze, the mayor has managed to put that amount of money into the fund over the last 30 months, cobbling together dollars from Community Development Block Grants, the Community Redevelopment Agency and elsewhere.

Because of the cyclical nature of the fund, continually lending out and taking in money, it still hasn't reached the original goal of reaching $100 million in size. For the fiscal year beginning in July, it is projected to be $42 million.

With the support of the City Council, Hahn also made it easier to put residential and mixed-use projects along some of the city's commercial streets and expanded the adaptive reuse ordinance allowing for conversion of old commercial buildings.

These steps have met with little resistance, in large part because they are directed at run-down areas where everyone agrees revitalization is needed. The real challenge will come when the inclusionary zoning ordinance passes in its final form some time next year. That's when it will run smack up against one of its more intractable opposing forces: the "not in my backyard" mentality.

In theory, inclusionary zoning requires affordable units to spread throughout the city's neighborhoods, wherever residential projects are going up.

But in dozens of other cities, including Agoura Hills, Pasadena and Santa Monica, local opposition to affordable housing has prompted the creation of "off-site allowances" in which affordable units can be built miles away from their parent projects.

"In recent years, NIMBYism has become a much more powerful force in L.A. because it's been institutionalized" because so many reviews are now part of the approval process, Guerra said. This has made the cost go up, and discouraged developers.

(In past eras, he said, race was a major factor feeding neighborhood objections to affordable housing; now it's almost exclusively class-based.)

But affordable housing advocates say they believe that local residents will not automatically reject projects in their neighborhoods.

"Affordable housing isn't such a dirty phrase any more. People are now seeing both private and non-profit housing projects that have beautified their neighborhoods," Garcetti said.


POLITICS

Eric Garcetti

Councilman

City of Los Angeles



'If we are going to build a single city where everyone has an equal chance to make it, we have to find places for people of all income levels to live.

"Because housing is a prism through which so much is refracted, it hits everybody's buttons sooner or later. Making progress has been difficult because there hasn't been a high priority on affordable housing in this city for the past couple of decades. Traditionally in L.A., it's easier not to do something. There are 100 ways to kill an idea or project, but only a couple of ways to do it right.

"The biggest success has been the creation of the affordable housing trust fund and halting the slide in building housing for this city and its workforce. We've put in tens of millions of dollars and are leveraging that money five-fold and six-fold.

"We are finally meeting some of the goals we set years ago. And it also shows that we don't have to be at each other's throats to accomplish something in this city."



Ray Pearl

Executive Director

Building Industry Association



'We are very supportive of the concept of housing for all income levels. In the city and the state we have an undersupply of housing. That's why housing is so high, because we can't supply enough homes to meet the demand.

"We have grave concerns with the inclusionary (zoning) policy and take a very active role against it. Inclusionary housing is a failed policy that is punitive and seeks to divide housing, making high-end and low-end housing.

"Affordability begins with availability. Currently, the overall construction number is far too low, so removing government barriers to housing could go a long way. More government mandates and red tape has never made a house cheaper.

"Affordable housing is a critical community need in Los Angeles and all of us who are interested should look for ways to increase productivity. The more we can come together on this, the more all of Los Angeles would better off."



Mercedes Marquez

General Manager

Los Angeles Housing Department



'I came on board as general manager six months ago; previously I was vice president of McCormick Baron Salazar Inc., one of the largest for-profit affordable housing developers. Before that, I was deputy general counsel with the Housing and Urban Development Department during the Clinton administration. So I have experience with affordable housing both from the private sector and the public sector.

"Our housing crisis is so severe that we simply cannot build our way out of it. We have to build new housing stock and maintain the housing stock we already have. It must be a balanced approach. That's the mission of the housing department.

"When it comes to building new housing, we now have a powerful tool with the Affordable Housing Trust Fund. Its purpose is to leverage as much government and other dollars as possible for the investment of the trust fund in a given project.

"Our biggest obstacle is always coming up with dollars, especially in tight budget years like we've been having."

Howard Fine and Kim Holmes

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