Update: Brown vetoes inclusionary zoning bill

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Update: On Sunday, Oct. 13, Gov. Brown vetoed Assemblywoman Toni Atkins’ inclusionary zoning bill, AB 1229. The story below was published earlier this month.

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Right or wrong, the specter of rent control has hovered over AB 1229.

Owners of existing rental property, however, shouldn’t sweat it.

Toni Atkins’ inclusionary zoning bill, which remains on Gov. Brown’s desk, wouldn’t change a thing for landlords with property in either rent-control or non-rent-control jurisdictions.

The bill centers on a method for requiring affordable housing in new construction projects and would reaffirm a tool that more than 170 jurisdictions have used to provide affordable rental housing since the 1970s.

If nothing else, the San Diego Democrat’s bill would clear up whether local governments can continue mandating inclusionary housing after a court decision — Palmer vs. Los Angeles — that triggered a statewide fit of head scratching. Or more precisely, it should clarify how local governments leverage below-market rate housing into new apartment communities.

In the Palmer case, both trial and appellate courts agreed with the plaintiff, who argued that Los Angeles’ inclusionary housing ordinance violated the Costa-Hawkins Rental Housing Act. The act says owners of apartments can set the initial and subsequent rents in any units with a certificate of occupancy issued in the past 18 years.

Essentially, the appellate court found that L.A.’s attempt to force rent restrictions on Palmer’s property amounted to rent control on new construction. The state Supreme Court declined to take up the case.

Was Los Angeles’ inclusionary housing ordinance really rent control? That depends on how technical you want to get. It’s true that inclusionary housing ordinances require apartment complexes provide cheaper rents for low-income residents — so from a literal perspective, it’s rent control.

It’s not, however, the type of rent control that keeps existing apartments far below market rate for decades on end, regardless of the tenant’s wealth. That’s San Francisco-style rent control and worlds apart from inclusionary zoning.

When CAA sponsored Costa-Hawkins, we didn’t place a bull’s eye on local inclusionary housing laws. We did take aim at San Francisco-style rent control on newly built apartment communities.

In fact, a compromise was written into the act to ensure its passage. Costa-Hawkins would not apply when an owner agreed with a public entity to provide inclusionary housing in a deal for a direct financial contribution or other incentives.

To date, the market appears to have regulated the success of inclusionary zoning ordinances. Developers participate — or not — in local markets based upon the accommodations granted and the eagerness of a local government to accept new construction. In situations where the owner is required to pay an in-lieu fee or include specific units for low-income tenants, the remaining market-rate tenants pay more in rent.

While landlords wouldn’t see changes from AB 1229, it’s not as clear cut for developers.

Cities were already finding ways around Palmer to keep inclusionary zoning alive, at least in principle.

Mountain View recently passed a fee of $10 per square foot on all new apartment development in the city to fund affordable housing programs unless the developer agrees to set aside a certain number of units at below-market rents.  Cities such as San Jose, Sunnyvale, and Campbell are moving ahead with similar fees.

For builders, AB 1229’s potential impact may be murky. If you’re a landlord, you can relax and expect business as usual.

Other views

More building is simplest way to reduce home prices (U-T San Diego)
Local control over affordable housing (Los Angeles Times)

 

 

 

Tagged: San Diego

  • CAA,

    Why is CAA having AB1229 author comment on her own terrible legislation? Absolutely crazy!

    Yes, some cities like Mountain View found a way around Palmer using flawed nexus studies and non-academic, non-peer reviewed economics. Former Council member Tom Means were fundamentally opposed to the rental housing impact tax and. Tom moved and I seconded a $10/square and that passed 4-3, outmaneuvering other Council members wanted a $20 or higher fee.

    I refused to sign a City letter to Governor Brown asking him to sign AB 1229. In fact, I wrote my own personal letter to him specifically asking him veto the bill.

    John M. Inks
    Mountain View Mayor 2013