My name is Sylvia Walker, and I am the writer and publisher of the Sweet Orange Housing blog. I grew up in Orange County; however, at the age of twenty I decided to venture out and see what the rest of the world looked like. Eventually, I ended up in the Silicon Valley area and spent many years there. While in the Silicon Valley, I worked as a freelance writer for high-tech companies such as Applied Materials, National Semiconductor, Applied Biosystems, and Oracle Corporation.

I enjoyed my time in the San Francisco Bay Area and working in the high-tech industry; however, fate intervened, and I returned to Orange County. Currently, I am pursuing freelancing, but I am shifting my focus to public policy, sustainability, cleantech and land use issues.

There is this thing out there called the California housing element. This document plays a decisive role in determining what gets built in California cities and counties. Since this document is so influential in shaping local housing policies, understanding how the housing element works is worthwhile. Therefore, I will give a more in-depth description in an upcoming post. At this time, knowing it is out there is enough. Now on to Irvine’s latest encounter with the housing element.

Photo of Montecito Vista Apartments, an affordable housing development in Irvine, courtesy HUD.gov

As required by state law, the Irvine Planning Commission reviewed the housing element document prepared by Irvine city staff. The planning commission approved the document as written with one change. That change requires the city council to consider, sometime in the coming year, adding an additional low-income housing set-aside for new rental developments. (Some set-asides already exist.) Note that this does not mean that the city council would have to adopt this new housing set-aside, just discuss it sometime in the coming year. If the city council eventually adopts the set-aside, builders of new rental developments in Irvine would be required to reserve 3% of the housing units for very low-income households. Very low-income is defined as below 30% of the median income of an area.

At the January 24th council meeting, the city council’s responsibility was to accept or reject the housing element as approved by the planning commission. Rejection would delay the housing element document being sent to the state. This could have serious consequences. (Look for the upcoming housing element post for more on this.)

Here is how it played out at the January 24th city council meeting:
Councilmember Lalloway stated, “The process is a little troubling to me.” He stated that, due to possible serious consequences of not approving the document in the as-is form, this forces the city council to approve the document and, therefore, discuss the 3% very-low income housing set-aside in the coming year. He also said that it was not the planning commission’s place to put such language in the housing element document. Councilmember Agran countered that, in the coming year, any one of the council members could ask that this be put on the agenda and the same result would occur. Councilmember Agran and Mayor Pro Tem Krom also stated that this would not require the adoption of the 3% very low-income set-aside, just that the City Council consider it in the coming year.

Lalloway also stated the grounds on which he disagreed with this type of requirement. His reasoning is that developers will increase the price on the market-rate units to cover the cost of the low-income units, and this would defeat the overall affordability goal. Agran countered that remembering that human beings are behind the numbers is important and gave this example: An elderly widow with a Social Security income of $10,000 would be able to rent in Irvine for approximately $250 per month. Having this widow live in Irvine as well as a mix of people with different incomes, including those with low incomes that work in Irvine, would be desirable, said Agran. “This is an important item to discuss.”

Here is my take:
Developers don’t increase the cost on the market-rate units to make up the difference on the low-income housing units. Instead, they charge what the market will bear. If this means they can make 100% profit, they will charge the amount that will give them a 100% profit. If the market-rate price will only allow them a small profit, or even a loss, then the developer will charge that amount. In other words, developers don’t add up their costs then add on some amount for profit to determine what they will charge. Instead, they charge what the market will bear.

Of course, if the developer reviews the numbers and determines that some requirements would make the profit too small to justify the project, they will drop their plan to build. However, if they decide to go ahead with the project, I am sure they have done a careful review and have determined that even with the low-income requirements the possible profits make the deal worth pursuing.

However, this is not the only question on housing set-asides that is open to debate. Whether any housing set-asides, for any reason, are worthwhile is a different philosophical discussion and for another time.

What now?
If the council did not adopt the housing element as approved by the planning commission, the city council would have had to send the document back to the planning commission before it could be sent for final state approval. Therefore, due to possible serious consequences if the housing element was delayed, all five council members voted yes on adoption of the housing element as submitted by the planning commission.

The state has 60 days to review the housing element and send it back to the city. At that point, it’s back in the city’s jurisdiction. This means the city will discuss the 3% very-low income inclusionary rule sometime in the coming year. If this is an important issue to you, watch for this item being placed on an upcoming agenda and be prepared to make your comments.

“Irvine has one of the highest median rents in the nation. The average monthly rent is approximately $1,800. Its housing market is far beyond what is affordable for low- and middle-income families.” —Low-Income Families Make Irvine Their Home, HUD.GOV

Discuss below or at Talk Irvine.