Affordable housing remains elusive in Petaluma

Petaluma officials this week laid bare the reality that most local housing development since the recession has disproportionately served wealthier residents, and tried to craft new tools to ramp up the production of affordable housing.

Of the 2,164 housing units in the pipeline, 152 are priced at an affordable rate, or about 7%, according to city figures. As economic forces and destructive wildfires continue to change the housing landscape, the city’s introspective look at its housing policies Monday revealed how – in the absence of state redevelopment funds – Petaluma has failed to effectively spur projects for lower-income residents.

To stimulate a better outcome, a shorthanded city council – with members Gabe Kearney and Kathy Miller absent – discussed a dozen policy suggestions created by planning and housing staffers, and heard from a spectrum of local developers at a workshop aiming to an uncover a framework for better responding to the housing crisis.

But even with the direction to staff, asking for potential changes to various fee structures, new zoning incentives and possible tenant protections, Mayor Teresa Barrett pointed out that the city had a limited ability to make a significant, quick impact.

“In general, we’re still just kind of chewing around the edges in terms of being able to provide (affordable) housing,” she said. “What we’re doing is what we can do, and we have to do it the best we can.”

In 1984, the city adopted its first inclusionary housing policy, a foundational first step that eventually introduced below-market-rate housing projects and homeless shelters like the Mary Isaak Center.

In terms of affordable housing, Petaluma boasts 1,576 units spread across 28 different properties, according to city figures. Over 700 are for seniors or disabled residents, and 169 are part of the first-time homebuyer program.

Burbank Housing CEO Larry Florin, one of the city’s affordable housing partners that oversees six local properties, said the nonprofit has a backlog of approximately 15,000 applications.

The combination of high demand and years of destructive wildfires in urban areas have caused building costs in the Bay Area to skyrocket, a point made frequently by for-profit developers that assert that they can only pencil-out market-rate projects.

As that trend took root in Petaluma, the city council passed a new inclusionary housing ordinance last fall that required each new housing development to set aside 15% of the units for low-income renters, an incentive created by instituting a more costly in-lieu fee.

So far, only two applications are being reviewed under the new policy, and developers have said it’s difficult to fund a project under the current requirements, according to city officials. One of the directives given to city staff this week was to explore possible adjustments to it.

“I do think what we did last year with our inclusionary housing ordinance is an important step, and I’d like to see it evolve,” said Councilman Dave King. “We’ve had two days short of seven months with it in place. Before we make it rest in peace, I’d like to see it have a chance to work. But I do understand the difficulties.”

The most attainable housing solution for Petaluma officials over the past two years has been policies to encourage the construction of accessory dwelling units, or ADUs, which are add-ons to existing single-family homes.

To incentivize more ADUs as a way to add low-cost housing and give homeowners additional income, the city recently removed its on-site parking requirement, and has reduced impact fees by over 50%.

Still, the collection of fees as a one-time lump sum has been viewed as a barrier when added onto design and construction costs. City officials are considering reducing or staggering fees, and using state grant funding to create a permit-ready ADU program.

“The opportunity for dramatically changing the rent price point and the number of units into a market is highest with (ADUs),” Councilman Kevin McDonnell said. “If we have 23,000 – that’s the staff number for housing units in town – and 10% of those add an ADU, that’s still 2,000-plus units.”

Over a dozen bills related to housing are currently working their way through the state legislature. Some, like SB 5, which would reinvent redevelopment for affordable housing and infrastructure, could be a boon for Petaluma.

Others, like AB 1486, a bill that could compel the city to develop on parcels like the publicly-owned Sonoma-Marin Fairgrounds, would likely stir controversy.

The council was generally supportive of new zoning incentives like reducing parking requirements, adopting small lot provisions for cottages or tiny homes and reducing the review hurdles for residential development.

Councilwoman D’Lynda Fischer also called for higher density allowances for properties along the city’s boulevards when it’s time to write the next General Plan.

“That’s where we have the leverage and that’s where we have the ability to plan out a more dense city that’s more livable as well,” she said.

The council was noticeably struck by a presentation from Jordan Moss, founder of Catalyst Housing Group, who presented a different model for creating affordable housing that so far has purchased existing market-rate housing and converted them to income restricted properties.

With a team of specialized organizations, Catalyst has created a formula that would utilize tax-exempt governmental bonds to finance each venture, requiring no public subsidies or equity in order to create housing that caters to all income levels, Moss said.

“We create a pretty significant public benefit from day one for the tenants that live at the property, and on an ongoing basis for the underlying jurisdiction,” he said.

One of the pilot properties was in Santa Rosa, a 390-unit project built in two phases over the last four years with a price tag of $200 million. The group is expecting to a close on a property in Fairfield later this year, Moss said, and has an expanding pipeline of properties and development projects.

“What you have is a lot different than what we’ve heard tonight,” King said after the presentation. “I’d like to take a closer look at it.”

(Contact News Editor Yousef Baig at yousef.baig@arguscourier.com or 776-8461, and on Twitter @YousefBaig.)