Press Release
From: Valley VOTE
Date: 8/23/04
Valley VOTE Press Release
Inclusionary Zoning
The Board of Directors of Valley VOTE has voted
overwhelmingly to oppose the Inclusionary Zoning
proposals of L.A. City Councilpersons Ed Reyes and
Eric Garcetti as presented in June 2004. Please find
below a report prepared by the Executive Committee.
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Inclusionary Zoning
Inclusionary Zoning Requirements
In order to address the resulting lack of affordable housing, Los Angeles City Council Members Ed Reyes and Eric Garcetti are promoting Inclusionary Zoning. Simply put, Inclusionary Zoning would require housing developers to set aside a certain percentage of units in new housing developments, reducing the rent or for sale price for lower income tenants and buyers, respectively.
The March 31, 2004 revised draft of the Los Angeles Inclusionary Zoning Ordinance (from the City’s web site pages for Inclusionary Zoning) has many requirements, but here are a few.
For rental units, a developer must set aside 10% to 12% of the units for households at or below 30% of the area median income, or below 50% of the area median income, respectively.
Units for sale are required to set aside 20% to 40% of the units for families with 80% to 120% of area median income, respectively.
Regardless of the cost to develop the housing, the rent or price charged is based on the prospective tenant’s or buyer’s income compared to the Area Median Income. As of July 2004 Area Median Income is $59,500 for a family of four and $41,650 for an individual.
The ordinance applies to all new residential developments of five units or more, and the restrictions are mandatory and permanent. In lieu fees would be subject to approval of the Housing Department.
In order to offset the cost impact of inclusionary units, certain incentives are offered to the developers. Those include an additional 15% density bonus, reduced parking requirements, reduced amenities within the set aside units, and reduced common open space.
Impact of Inclusionary Zoning on Affordable housing
According to the for profit developer testimony at a Los Angeles City Hall forum on Inclusionary Zoning on October 22, 2003, the incentives are not realistic or adequate enough to overcome the increased cost. Furthermore, requirement #1 on Item #5.2 of the Inclusionary Zoning matrix states: “Allow town home construction of affordable units in a single family detached home development.” This most contentious provision overrides community specific plans which have taken communities many years to put in place.
The David Paul Rosen Report, funded by the City of L.A., boasts about 107 cities and counties which now have this ordinance, and that it has produced 34,000 affordable housing units. They fail to point out, as indicated in the Reason Foundation Report, it took 30 years to build those units, averaging only 1,133 a year. The Kosmont Partners determined that the two most important assertions made by David Paul Rosen &Associates are insupportable. The report’s implication that Inclusionary Housing is not likely to affect housing production in Los Angeles is based merely on a visual examination of bar chart data from other jurisdictions. It also fails to discuss how developers in Los Angeles would respond to the new requirements. The findings of feasibility are based on pro forma financial analyses that incorporate faulty assumptions for the costs and revenues associated with new housing developments in Los Angeles.
The Reason Foundation analyzed the 50 cities in the San Francisco Bay area that have Inclusionary Zoning. Since 1973 those cities have produced an average of only 228 affordable units a year. At current rates, Inclusionary Zoning will produce only 4% of those cities’ affordable housing needs, and would require 100 years to meet the current five-year housing needs.
While proponents decry the loss of the middle class, and a widening gap between rich and poor, Inclusionary Zoning would exacerbate both. To provide the required set aside units at prices commensurate with the median income, allocating the price differentials over the market rate units makes those units less affordable.
Preventing low income buyers of the restricted price units from benefiting from price appreciation has at least a few destructive results. The ordinance would eliminate incentive to maintain and improve the units, prevent the buyer from benefiting from the appreciation buyers of market rate units gain, and taxable assessed value is downgraded.
The low-income buyers would be prevented from using equity growth for college tuition and financial security in their senior years. According to the Reason Foundation study, the requirements regarding “for sale” units actually force the sale prices below the limited price. The study also indicates the loss of $553 million of local and state tax revenue annually.
Recommendations
The normal “move-up” from middle income houses is not happening. If this move-up can be encouraged, many affordable homes would be available. We oppose the Inclusionary Zoning Ordinance, and recommend the following solutions to assist in improving the availability of affordable housing.
1. Streamline the entitlement process.
Turnaround time from purchasing the land to ground breaking can take anywhere from nine months to two years, and the cost is prohibitive. This cost not only includes the entitlement costs, but the cost of holding the land while the entitlement process takes place. This cost has to be passed on to the buyer in the price of the house/unit. The restrictions on building in Los Angeles are onerous.
2. Build along the transportation corridors under the new mixed-use zoning.
Mixed use successfully provides affordable housing in other cities.
3. Revisit the drastic “down-zoning” that took place in the 80’s. There are
many properties on main streets that could support higher density.
4. Revise provisions of the Los Angeles Rent Stabilization Ordinance that have discouraged investment in existing apartments, leading to their deterioration. The original, simple permanent rent increase policy needs to be reinstated for capital improvements and rehabilitation. Apartment owners need a practical, efficient, and fair policy for the pass through of all city imposed tax, fee, and other cost increases.
Developers need adequate incentives restored and less onerous restrictions to encourage them to build. The increased supply will improve affordability. With the private sector taking care of supply, the City not only satisfies more of the demand for housing, but also enjoys the increased tax revenue.
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For questions, comments, or further information contact Joe Vitti by
Email at javittisr@cs.com or write to Joe Vitti- President of Valley
VOTE at 14622 Ventura Blvd. #424, Sherman Oaks,Ca.91403
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