Taking Sides Taking Sides (April 21, 2000)@takesidesq:Should Pleasanton require affordable housing in new projects? @takesideshead: City must address affordable housing shortages

by Christine Steiner

By adopting an Inclusionary Zoning Ordinance, the city of Pleasanton is affirming its intention to address the serious lack of affordable housing in our community.

While one's first impulse is to agree with Mr. MacDonald, because we have been taught that "There is no such thing as a free lunch," nowhere in the ordinance does it say the unit has to be identical with the market rate unit. The only requirement is that the "inclusionary unit shall be constructed with identical exterior materials and an exterior architectural design that is consistent with the market rate units in the project."

In drafting an ordinance that will be in effect for many years, it is important to provide flexibility. The dynamics of the marketplace can change radically, requiring the utmost cooperation between the developer and the city. Many developers have used tax-credits and other financing options to provide affordability and reduce the financial impact on the market rate units. The reality of the marketplace is that you can only charge what the market will bear.

In addition to state and federal financial assistance, the city also has the option to provide incentives to a developer in the form of fee reductions, waivers or deferrals, direct financial assistance and fast track processing, which in itself reduces the development cost of a project. I believe the city is correct in retaining the right to review each proposal on its merit.

Far from discouraging development, this ordinance encourages open discussion about affordability from the start. The recent approval of the Nolan Farm property on Rose Avenue clearly demonstrates the ability of a developer to work with city staff to come up with a win-win situation for everyone.

It is my hope that developers will respect and honor the intent of the ordinance by working with the city to provide some affordable housing on the small amount of land available in the city. While in some cases the payment of the Lower-Income Housing Fee may be warranted, it must be allowed only after all other options have been exhausted.

I have watched our city grow and benefit financially from the strong tax base we have secured through the commercial and retail development of our business parks and shopping centers. Our city chose to be more than a bedroom community and in doing so has an obligation to provide a range of housing opportunities in both style and price for those who work and live here. I view the Inclusionary Zoning Ordinance as an exciting challenge to the many developers who have profited from our community over the years and I hope they will accept it and prove that it can be done. Christine Steiner, a resident of Pleasanton since 1967, is a member of the Pleasanton Housing Commission and winner of the 1999 Mayor's Award. "Our city . . . has an obligation to provide a range of housing opportunities in both style and price for those who work and live here."

@takesideshead:Inclusionary zoning is tax on all homebuyers

by Peter MacDonald

Local government mismanagement of our housing supply has given the Bay Area the highest housing costs in the nation. Inclusionary zoning is the term used by those who want to tax the housing consumer to solve this self-inflicted lack of affordable housing. With inclusionary zoning, the developer is required to rent or sell new housing units at below their cost of production.

Inclusionary zoning exactions raise the cost of new housing, and the cost of the used housing which competes with that new housing. The resulting increase in new and used housing costs dwarfs the size of any subsidies collected from new housing. Inclusionary zoning makes the perpetrators of housing scarcity feel better, but it actually increases total housing costs.

The state Department of Housing and Community Development has opposed inclusionary zoning in a letter addressed to the city of Pleasanton: "We do not support the City's adoption of inclusionary requirements and are very concerned that existing in-lieu fee and proposed land dedication requirements will add to the cost of housing for all levels. These additional costs could constrain the development of the market rate units upon which the inclusionary units depend."

Adoption of the proposed inclusionary ordinance would render Pleasanton's housing element and its implementation legally inadequate.

The saying, "There is no such thing as a free lunch," reiterates that housing subsidies have to be paid by someone. Economic analysis shows the cost of the proposed in-perpetuity set aside of rental units (as proposed in the Pleasanton ordinance) will be borne by the remaining tenants. Families in rental units are probably in the group least able to afford a 5 percent or more rent increase per month to subsidize their neighbor's rent. In perpetuity rental subsidies equate to robbing the poor in order to subsidize the poorer.

To a socialist, the solution is to have the capitalist apartment owner just cut back his or her profits. But that result simply drives capital away from rental housing construction because capital will earn higher returns elsewhere. Inclusionary zoning is based upon the same economic philosophy as rent control. But the victims are the other tenants, rather than the landlords, because the government cannot force investors to go into the rental housing business, but it can force landlords to stay in the rental housing business. The more government undertakes to manage the scarcity it creates, the more severe the scarcity becomes.

A more productive strategy to soften resistance to housing supply might be to raise the regional traffic fee high enough to cover the real cost of traffic congestion from new growth. A market based strategy to provide affordable low income housing would be to release government restrictions upon apartment construction and mobile home park construction.

The real housing affordability problem is the artificially high price of market rate housing which is exacerbated by inclusionary zoning. Our California children can have affordable housing, like the rest of this country, but only when we rediscover and unleash the power of a free housing market.
Peter MacDonald is a planning attorney with offices in downtown Pleasanton.
"The government cannot force investors to go into the rental housing business."