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Pay more for affordable housing, Petaluma asks developers

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Petaluma leaders Monday appeared to reach a deal on a sweeping new set of development rules designed to spur affordable housing in the city beset by an acute shortage and rising housing prices.

The city council was poised to raise affordable housing fees on developers by more than 100 percent, a change the city hoped would encourage more building. The new policy, which was crafted over the past year, comes as Sonoma County looks to add thousands of new housing units after 5,300 homes were lost in October’s wildfires.

It amounts to Petaluma’s biggest shift in housing policy since the state in 2011 abolished redevelopment, a funding tool the city relied on to finance affordable housing projects, officials said.

“What we have now is clearly not working,” Councilman Dave King said. “It has not worked since redevelopment was removed as an option.”

The council stopped short of adopting the policy, giving city staff extra time to incorporate changes into the final draft expected to be discussed Sept. 10.

At the heart of the new policy is a requirement that residential developers dedicate 15 percent of their housing units as affordable for low-income residents. Developers would have an option to instead pay a fee, which is proposed to be equivalent to the cost of building 20 percent affordable housing units, essentially making it cheaper to build the units on site.

The proposal would raise the current affordable housing in-lieu fee of $9,022 per 2,000-square-foot home to $20,236, an increase of 124 percent. Some council members balked at the drastic increase in fees, though the proposal appeared to have the votes to pass.

“I have an issue with the in-lieu fee,” Councilwoman Kathy Miller said. “I think over 100 percent is too much.”

Councilman Chris Albertson said setting fees too high could discourage developers from building any new housing units in Petaluma.

“I have a concern we make this so expensive (developers) pull back and they don’t build and we don’t have housing for any new people coming to town,” he said.

Councilwoman Teresa Barrett said encouraging builders to include affordable housing units in their projects is the best way to meet the city’s state-mandated housing goals. Since the loss of redevelopment funding the city has struggled to build affordable housing with the fees it has collected.

“I think this is very fair,” Barrett said. “I think if we are really serious about getting affordable housing in this community, we want to see it done by as many projects as possible.”

The council debated what to do with projects already in the works. The proposal would exempt projects that have been approved by Jan. 1. Any project in the pipeline after the new year would have to pay the higher fees.

The council reached a compromise on the Riverfront development, a 273-unit mixed use project along the Petaluma River that is being developed by Basin Street in phases. Basin Street still needs approvals for the later phases, but the council has signed off on the overarching concept of the development. The approved subdivision map will allow the Riverfront developers to pay the lower affordable housing fees, according to the compromise agreement.

Councilman Mike Healy said that changing the fees could impact some projects that have been in the works but will not be deemed complete by the new year, especially if the developer has assumed paying the lower fees.

“It will mostly burden the pipeline projects that are scrambling to try and meet the Dec. 31 deadline,” he said. “It would not be a great surprise if some of those decided to turn around and walk away.”

Mayor David Glass warned that grandfathering too many projects at the lower fee level would defeat the purpose of raising the fees.

“A developer is never going to say ‘let’s roll back the prices we are going to offer to the public to two or three years ago prices,’” he said. “You can’t say we’re going to craft legislation that changes the fees and collects more money and then exempt every person.”

(Contact Matt Brown at matt.brown@arguscourier.com.)