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Petaluma eyes shift in affordable housing policy

Petaluma officials are considering requiring developers of housing projects to include affordable units in future developments, a policy change viewed as catalyst for building more below-market rate homes in the city.

Currently, developers of large projects can opt to pay a so-called in-lieu fee into the city’s affordable housing fund rather than develop on-site units, an option far less costly for developers but less advantageous for meeting the city’s housing needs. Petaluma officials are also contemplating increasing that in-lieu fee from 15 to 20 percent.

As the fee structure stands, it would cost $5.64 million for a developer to build 15 units of affordable housing in a project with 100 homes that are 2,000 square feet each. In the same scenario, the in-lieu fee of $9,022 per unit would cost the developer $900,000, a more frequently chosen option.

New state legislation

A state law that took effect Jan. 1 gives municipalities the ability to require developers of rental housing to include affordable units as part of their projects, as long as other alternatives are also provided. The city already has the ability to require for-sale housing developers to include below-market rate units.

Under a proposed policy discussed at a March 5 city council meeting, developers of projects with more than five units who don’t want to build affordable housing would be required to petition the city council to allow for another option, which could include paying a 20 percent fee or requesting a smaller percentage of on-site units.

“The language that is being recommended essentially requires that if you want to come and beg for an exception, you have to come and justify yourself and it’s subject to city council approval. That’s better than what we have been doing where people have routinely paid in-lieu fees ... There’s a small pot of money and a big need and I’m thrilled we have the ability to require the housing,” City Councilwoman Kathy Miller said.

Community outreach

Before changes to the housing policy can be enacted, at least one community meeting with developers and housing advocates will be held, Housing Coordinator Sue Castellucci said. Changes to the city’s housing element would be sent to the California Department of Housing and Community Development, reviewed by the city’s planning commission and finally, approved by the city council, she said.

The changes would not affect project applications that were deemed complete prior to July 1.

“We’re not going to have affordability in the market here for a long time, if ever,” City Councilman Dave King said. “That’s probably true for the remainder of the Bay Area. You’re not going to build out of it … To the degree we can go in that direction (of requiring affordable housing) that’s where I’m strongly leaning. If we have to provide an alternative, I would push it to the highest level and see where that goes in terms of the market.”

Regional requirements

The construction of affordable housing in the city is required by regional targets, and between 2015 and 2023, the city is supposed to build 745 units, including 423 very low to moderate-income units. A total of 334 units were constructed between 2015 and 2017, 10 of which were built for moderate incomes, according to a city staff report.

Projections show 2,061 units will come online by 2023, 75 of which will be affordable. The city is also partnering with two nonprofits to provide land for as many as 83 affordable units for seniors, veterans and below-market rate residents.

Loss of redevelopment

The 2012 loss of state redevelopment funds, which kept portions of property tax generated in the city to use for development, dealt a $3 million annual loss to the city and hampered its ability to support affordable housing developments.

The city has about $1.5 million in its affordable housing fund, Castellucci said. Historically, it’s contributed between $3 to $4 million to affordable housing projects of about 50 to 60 units, she said.

“The only way Petaluma is going to get affordable units is to get them on-site,” she told the council.

Representatives from several developers with major projects in the city did not respond to requests for comment.

Petaluma People Services Center Executive Director Elece Hempel, whose organization handles fair housing issues and operates a home share program, said the changes won’t be enough to solve the housing crisis. Looking at a medley of options, including increasing building height limits or setting different thresholds for affordability may be other things for the city to consider, she said.

“It’s one step forward … but there’s got to be a whole bunch of solutions that play into how we deal with housing,” she said.

(Contact Hannah Beausang at hannah.beausang@arguscourier.com.)