Update to Inclusionary Housing Ordinance delayed

Inclusionary Rental Units

by Steven Felschundneff | steven@claremont-courier.com

The season of delayed decisions continues as the Claremont Planning Commission elected on Tuesday to give itself a few more weeks to examine changes to the Inclusionary Housing Ordinance before making a final recommendation.

The commission had been tasked with updating the current Inclusionary Housing Ordinance to make it harder for future developers to skirt construction of low income housing. Under the current law any new development over seven units must include either 15 percent moderate income or 10 percent low income units. However, since 2006, when the law went into effect, nine developments have included 67 moderate units but none in the low income category.

The city’s planning department has been contemplating an update to the ordinance for several years but the issue became a top priority after the Claremont City Council voted last week to tie the implementation of the Village South Specific Plan to the passage of a new ordinance.

The sense of urgency was threefold. First, the council wanted to avoid delaying the implementation of the VSSP indefinitely given that it has been four years in the making and there is a developer waiting in the wings to begin its application. Second, the city was rapidly running out of time to schedule meetings with the August recess jut a few days away. Finally, the process for updating an ordinance has a 30-day wait period built in by state law which must be accounted for in any timeline.

Given these three factors, the council elected to send the IHO to the planning commission immediately with the goal of bringing it back to council for its first meeting in September. If approved, council would hold a second reading on September 28, which would trigger the 30-day wait period, with October 29 chosen as the effective date for the ordinance. The Village South Specific Plan would be implemented in tandem.

The U.S. Department of Housing and Urban Development determines what qualifies as low income for any given region, while the California Department of Housing and Community Development (HCD) calculates moderate income. This distinction is critical because each department has a completely different methodology for determining affordability.

Under HUD, $94,600, or 118 percent of the average median income (AMI), is considered low income for a family of four, while moderate income determined by HCD is $96,000 a difference of just $1,450. The two paths diverge when calculating what constitutes an affordable home. HUD sets the sales price at 70 percent of AMI with 30 percent of income allotted to housing. HCD allows 110 percent of AMI with 35 percent of income going to the housing expense. As a result, under HUD low income rules a typical three bedroom townhome would be affordable at a sales price of $71,300 but that same unit would be $333,500 for moderate income buyers. The market rate price would be $630,000, which creates a affordability gap of $558,700 for low income but only $296,500 for moderate.

HUD’s calculation of low income has been growing rapidly for years driven by the steep increases in Southern California’s housing costs.

Kathe Head, the consultant tasked by the city to give Tuesday’s detailed presentation on housing ordinances, joked that she planned to retire once the HUD definition of low income was actually higher than HCD’s definition of moderate income.

The planning department gave the commission four choices for updating the ordinance. Choices “A” and “C” would create one group which recognizes that HUD low and HCD moderate income are effectively the same and would explicitly allow low income households to purchase units at the moderate income price. Under this option the units would be counted as moderate income for purposes of the Regional Housing Needs Assessment which leaves the city wanting to plan for low income housing under the mandated housing element.

Options “B” and “D,” which the commissioners preferred, would create a hybrid model under which the low income standard would be reduced to 80 percent of AMI or $64,000, while moderate would remain at $96,000. The affordable sales price calculation for low income units would be substantially higher, in the low $200,000 range for the three-bedroom townhome. This model would allow the city to claim some units as low income under RHNA.

Commissioners discussed but did not adopt any percentage of units that must be affordable under the new ordinance.

The proposed IHO creates a much simpler mode for determining low income affordability with the maximum allowable rent calculated based on a benchmark household income (BHI) and the size of the rental unit, minus expenses. For example, with a BHI of $43,000 a renter of a two-bedroom unit would be limited to spending just 30 percent of income, or $1,080, minus a utility allowance of $80 for a maximum allowable rent of $1,000.

During public comment the vast majority of residents supported passing a revised housing ordinance in time to be implemented for any development in Village South. Representatives from the builder Arteco Partners and Village Partners, who hope to begin the application process for the first construction under VSSP, dissented. They contend the revised IHO may derail their project, South Village, by adding costs that could make it economically unviable.

Following the staff report and an extended period of public comment, several commissioners clearly felt uncomfortable making a rushed decision, particularly given the four short days they had to review the staff report.

Commissioner Isaac Rahmim was the first to express reluctance about proceeding with a vote in part because the report did not include an analysis of the economic impact the ordinance could have on future developments. He also expressed a need for additional time to consider what would be a big change in Claremont’s housing policy.

Chair Leigh Anne Jones agreed, “Frankly I was a little overwhelmed with all the information,” she said.

Asked about performing the analysis commissioner Rahmim requested, Ms. Head replied it would take about six weeks and could cost $30,000, a threshold that most likely would require city council approval.

Vice chair Parker Emerson proposed a compromise—skip the analysis, but continue the item to a special meeting during the summer recess. After some discussion the commission voted unanimously to reconvene on August 10 at which time they would come up with a final recommendation.


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