The dual treatment of housing as both a human right and a means for profit has yielded stark results in Orange County homebuilding.
While market-rate housing production hums along throughout the region, housing progress for OC’s poorest potential residents continues to lag.
One of the main issues that builder advocates talk about regularly is what they see as the tricky business of getting financing for truly affordable housing units.
They argue these units don’t yield a return on builders’ investments.
Progress on a joint effort among all OC cities – to build 2,700 units of housing geared toward people at risk of homelessness by 2025 – puts this paradox in plain view:
As of November, officials had to build 1,394 more units of what’s called “permanent supportive housing” within two years to make good on the much-publicized goal from 2018, according to the latest available tracking by the OC Housing Finance Trust.
While a total of 2,634 units have been built under that regional effort since that year, only 1,306 of those units accounted for low-income supportive housing as of November.
“It’s a losing proposition, right?” said Elizabeth Hansburg, a local housing production advocate and executive director of People for Housing OC.
“When you’re renting the apartment for less than the cost of building it and operating it … there is no incentive, from a business perspective,” Hansburg said.
In Orange County, any person making less than roughly $80,000 a year qualifies for subsidized housing, according to income limits from the Housing and Community Development agency.
People need to make more than $51 an hour – nearly $9,000 a month – to afford Orange County’s average rent of $2,672 without being “rent burdened,” according to a May housing report from the California Housing Partnership.
The group defines “rent burdened” as paying more than 30% of one’s income toward rent.
“Unless you have a council member with a vision or a deep commitment to building affordable housing, it doesn’t necessarily rise to the level of ‘Oh, this is a crisis in my city,’” said Elizabeth Hansburg, executive director of People for Housing OC.
The common argument among homebuilding advocates and local officials pushing more development is that housing becomes more affordable with more supply.
One affordable housing leader questions what kinds of homes local leaders have in mind.
After all, Orange County is building.
“There is production of housing in general,” said Cesar Covarrubias, executive director of the Kennedy Commission, in a June 1 phone interview. “Most cities in this current cycle, I would say 90% of the cities, 95% of the cities exceeded their RHNA production.”
The state-mandated quota, known as the Regional Housing Needs Allocation, is the primary system by which the state determines where housing is built.
The difference for Covarrubias is whether a city “has a specific policy or program” like an inclusionary housing ordinances in Irvine in Santa Ana which mandate developers include affordable units in their projects or pay into a city fund set aside for affordable units elsewhere.
“Unless a city … has an inclusionary housing ordinance, you’re not going to see balanced housing development because market-rate developers are not going to make money,” Covarrubias said.
A chief example is Santa Ana.
There, what’s known as the Housing Opportunity Ordinance has been subject to political differences and, subsequently, several revisions.
In 2020, a prior City Council under Mayor Miguel Pulido voted to relax the ordinance, lowering developer fees from $15 to $5, and argued that a time of pandemic hardship called for more incentives to build in town.
In 2022, a different City Council voted to reverse the 2020 decision, lowering the ordinance’s applicability threshold from 20 units to 5 units and increasing the previously-lowered fees, but this time with a sliding scale that lowered depending on how much union labor was factored into the project.
Proponents of the law ranked affordable housing over developer preference. Critics said the policy has all but discouraged any building in town.
The city has accepted multiple residential development applications since the April, 2022 revision, according to a Voice of OC review of monthly application information provided by the city website.
One of those projects comes thanks to an award of $2.2 million in inclusionary housing funds, in which Habitat for Humanity of Orange County seeks to construct three residential buildings that would provide six affordable units for-sale. All six units would contain three bedrooms, a living room, kitchen, and an attached two-car garage, according to city staff.
And just last week, two nonprofits broke ground on a $30 million project bringing 47 affordable homes to Santa Ana, with construction expected to wrap up toward the end of 2024.
Housing affordability doesn’t just impact tenants.
Another major interest:
Landlords.
“Affordability is a concern for all of us, because we recognize how hard it’s going to be for younger generations to ever buy a place,” said Chip Ahlswede, a spokesperson for the Apartment Association of Orange County, in a phone interview. “I think we want to find those solutions.”
Ahlswede thinks differently about inclusionary housing.
“It’s a much more viable solution when it’s in a density bonus situation, where it’s an opt-in kind of thing. Because when it’s a mandated situation where you must build X percentage of it, it cuts into the profit margin and the decision making of the developer.”
In a world where Ahlswede says one “magic bullet” for the problem “just doesn’t exist,” he sees potential inroads in granny flats and what he calls needed reforms to the California Environmental Quality Act.
Granny flats “are a great piece of the solution,” Ahlswede said. “But you take a look at some cities, like Yorba Linda, where that was the extent of their housing element. I appreciate what they’re trying to do there but let’s be honest, that’s not gonna get you all the way there.”
And “we’ve talked for decades about CEQA reform, and CEQA is very, very important. But at the same time, some of these things are a little bit absurd that we’re digging into, that have been dug into several times, especially when we’re looking to reuse properties.”
Another major stakeholder in local housing production:
Conservationists.
“With CEQA, we have benefited from mitigation from development projects that had buffer zones that created trails and restored lands,” said Melanie Schlotterbeck, an open space advocate with Hills for Everyone, a nonprofit that helped create Chino Hills State Park .
“And so CEQA has been a driving force in conservation,” she said. “So of course we support it.”
However, Schlotterbeck said, “We also recognize that there may be updates that need to be addressed that modernize the CEQA provisions that set procedures for settlements, that clarify exemptions, et cetera.”
She called CEQA an “unfair” scapegoat when cities should be focused on streamlining their General Plan policies – documents that outline a community’s vision for planning out growth.
In turn, she and the Planning and Conservation League agree it’s time to revisit certain sections of the policy but said “we’re not entirely comfortable with the rollbacks that are being proposed through the May revision of the Governor’s budget by trailer bills.”
Homebuilding in general still faces numerous hurdles, like a lack of political will or incentives for developers to build low-income units, said Hansburg.
“When you finally start to talk about a site … It’s one of the least popular projects that you can bring to your constituents. They’d much rather see new playground equipment in the park, or a new park or some other kind of community benefit,” she said.
Ahlswede agrees.
“The real solution is saying yes to more and not being stuck on, ‘Well, I don’t want affordable housing because I don’t want the traffic that that brings, or I don’t want density, because that’s too many people in my area, or I want to see this be a park.’ Well, that’s lovely. It’s been a factory for 20 years.”
Hansburg said the crisis is so widespread, it could drown out the gravity of the situation.
“The sense of urgency is lost because it’s a perpetual crisis everywhere,” Hansburg said. “There is absolutely an urgency to this issue.”