Santa Ana City Council members could make housing developers pay more into a citywide affordable housing fund if they don’t include such units in their own projects after the previous council lowered them by roughly 33%.
Last year, Santa Ana City Council members relaxed regulations on housing developers in the city in an effort to encourage more construction during the Coronavirus pandemic — making it easier for developers to build luxury and market-rate housing with less requirements to accommodate lower-income renters.
Now the council may be on track to reversing last year’s deregulation.
The Housing Opportunity Ordinance (HOO) is Santa Ana’s policy requiring certain development projects in the city to either create on-site affordable units, renovate older ones, or pay into an “in-lieu” fee reserved for building affordable housing elsewhere.
Critics of the law, which included homebuilding and developer organizations, have pointed out that no building permits had been pulled with the city since 2015 — Minh Thai, the city’s executive planning and building director, explained at the July 26 council meeting.
In turn, officials in favor of relaxing the law called out a need to incentivize developers to build in the city.
A city council majority last year lowered the city’s in-lieu fee from $15 per square foot to just $5 in September 2020.
That change drew criticism from affordable housing advocates.
“The lack of safe and affordable housing is one of the major reasons folks are driven out of the city,” Karen Alvarado, an advocate with the Orange County Congregation Community Organization, said during a public comment at the July 26 meeting.
“It is our moral obligation to support those who need it most. We are all trying to recover from one of the hardest times coming out of the COVID-19 pandemic, and as we’ve seen before, Santa Ana was one of the hardest hit cities.”
Now, city officials are discussing bringing the fee back to its original $15 amount, if not more.
At the July 6 council meeting, the council discussed possible changes to the city’s Housing Opportunity Ordinance. City staff presented a study done by a Southern California real estate advisory firm that described posible in-lieu fees based on the current market conditions.
The study reported a potential $17.10 to $17.80 fee per square foot for leasable area and a potential $13 free per square foot for saleable area.
At the July 26 meeting, the council held a work study session regarding the issue, with residents and community groups able to give public comments on the matter.
Many public speakers representing developer groups claimed a $15 fee would be too high, while affordable housing advocates claimed the increase is necessary to create housing the city desperately needs.
In a presentation from the July 26 meeting, potential changes to the in-lieu fee was described using a tier system depending on the size of the build: $6 for projects with five to nine units, $9 for 10 to 14 units, $12 for 15 to 19 units, and $15 for 20 or more units.
Previously, the fee had been a flat rate of $5 per square foot only for projects with at least 20 units.
However, many speakers argued that developers would simply refuse to pay this fee, like before, and instead build elsewhere.
For example, Thai described during the July 26 council meeting that the in-lieu fee was raised to $15 in 2015, and during the five year period from 2015 to September 2020, no developers pulled permits to build in the city.
However, when city officials dropped the fee to just $5 per square foot, two developers began in less than a year, gaining $3.7 million in fees to be used toward affordable housing projects, Thai said.
While some Santa Ana council members argued that the lower fee lost the city more than $7 dollars in fees, other members argued that the city wouldn’t have gained any funding from the in-lieu fees if it had remained $15, and now, the city will see a cease in developer projects in the city if the price returns.
“Fifteen times zero over five years is zero,” Santa Ana Council member Phil Bacerra said during the July 26 meeting. “We had zero dollars coming in. Now … $5 a foot times five months equated to $3.7 million in in-lieu funds that went to helping sustain our community.”
However, other council members and speakers ranked the importance of affordable housing in the city above developer preferences.
“Santa Ana is one of the lowest income communities, definitely in the county, but in the state,” Mayor Vicente Sarmiento said during the July 26 council meeting. “Who are we building for? If we are going to do market rate, we know it’s not for the majority of Santa Ana residents. There may be some that could afford it, but not many … let’s have balance.”
Another study presented at the July 6 meeting explored affordability of housing in different Santa Ana zip codes.
The study found that the necessary hourly wage for a family to afford a two-bedroom rental unit in the six zip codes in Santa Ana is $28.30 at the lowest and $39.32 at the highest.
Additionally, only 1% of five-person families can afford a three-bedroom rental unit for the southwest zip code in Santa Ana, while the five other zip codes range from 2% to 62%.
“This investment in our most vulnerable communities will be a great first step to help end the cycle of poverty for our residents,” another speaker said at the July 26 meeting.
There was also an emphasis on hiring local skilled and trained workers for Santa Ana-based developer projects. A couple council members and public speakers said they would support an incentivization program where developers who hire local skilled laborers could pay less in-lieu fees.
Other proposed changes for the housing laws include more time for developers to pay in-lieu fees and more affordable housing set aside for extremely low income residents.
The Santa Ana City Council meets again at 5 p.m. tomorrow night.
Angelina Hicks is a Voice of OC News Intern. Contact her at firstname.lastname@example.org or on Twitter @angelinahicks13.