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Photograph by Carlie Statsky
Compromise Position: In an effort to get housing built under stringent state guidelines, Tom Burns, the county's chief planner, has proposed loosening the definition of affordability.

Playing the Percentages, Pt II

Now that Santa Cruz County has expanded its definition of 'low income,' who will get subsidized housing? The second in a two-part series.

By Paul Wagner

In last week's installment, writer Paul Wagner reported on a little-noticed program approved in June 2007 by the Board of Supervisors. Under pressure from the state to show more commitment to housing low-income people, the county zoned 30 acres of developable land on seven parcels as high density, with 40 percent of the units to be designated 'affordable.' Faced with pushback from developers, who say it's impossible to profitably build under such constraints, chief county planner Tom Burns proposed designating a $15 million fund to help out—and suggested redefining the term 'affordability' itself.

In coffee-shop parlance, what's "affordable" varies from table to table. A pair of high-tech execs might discuss an "affordable" yacht, while a few lattes away, struggling single mothers may compare notes on where cans of soup can most affordably be bought in bulk.In the world of housing and planning, however, the term "affordable" has a specific legal meaning: it's what those who live in a particular community can spend, on rent or mortgage plus utilities, without forking over more than 30 percent of their take-home earnings. Because that number varies from one community to another, so does the definition of affordability.

The federal Department of Housing and Urban Development measures these figures continually. Every quarter, HUD releases reports detailing Area Median Incomes (AMI), which tell localities what people are earning in their area. HUD labels those whose earnings fall in the middle of this vertical income thermometer—from 80 percent to 120 percent of the median—"moderate income." Those earning more than that are labeled "above moderate income," while residents earning less than 80 percent of median are "low income," and those earning 50 percent or less are categorized "very low income."

The state of California and its housing arm, the Department of Housing and Community Development (HCD), use these four categories to determine whether local governments are meeting residents' needs. If, for instance, a city or county filled with farmworkers downzones all its potential housing sites until they can only accommodate mansions, HCD takes that as an indication that there's a lack of commitment to do what state law requires—namely, "house all social classes"—and starts a crackdown. HCD applies this same standard to all four income categories. In theory, Malibu wouldn't get way with rezoning and eventually replacing all its beachfront mansions with studios, for instance, because that would deny above-moderate-income residents places to live. In the real world, however, the pattern is usually the same: working-class people pay the taxes that build a town's roads and infrastructure, the improvements attract a wealthier class of newcomers, the newcomers promptly begin to downzone every possible parcel of land, and by their senior years the community's working-class pioneers are chased off to someplace less desirable.

History of Exclusion
Santa Cruz County government has historically excelled at that practice. From the moment post-World War II retirees arrived in the county, saw the resource-rich land settled by everyone from Mountain Charley to Italian and Japanese fishermen, and formed a county planning apparatus to control future development in the 1950s, our local government began banning, restricting and regulating entire types of housing.

That work was carried on, virtually uninterrupted, by the technical and university class that arrived in the 1970s. While singing the song of affordable housing in cyclic electoral choruses, the newest newcomers continued the banning and downzoning process—this time under the rubrics of preserving the rural feel of the place, protecting the environment or simply keeping the neighborhoods "nice."

With only one brief interruption—then-Supervisor Gary Patton's attempt, as part of his 1978 growth management scheme Measure J, to preserve a few "housing opportunity zones" at a density of 30 dwelling units per acre—the elimination of sites for affordable housing continued unbroken for the next two decades.A Republican-dominated Board of Supervisors proved so determined to dump even these few sites that Patton himself, along with Fred Keeley (also a supervisor at that time), ended up voting along with them.

By the mid-'90s, not one single parcel of residential land remained at a density high enough to build apartments or Single Room Occupancy (SRO) units. In fact, only 17.4 acres remained, in the entire unincorporated county, on which anything denser than single-family homes or duplexes could be built. And those were only dense enough, at a basic 17 units per acre, to permit condos and townhouses affordable to those of median income and above.

It's in that discriminatory context that the state yanked the county's housing plan certification in 1994, returning it only momentarily in 1999 when the county proposed minor reforms. Certification was yanked again after a majority of supervisors—two Republicans and one Democrat—refused to approve even those. So for a decade and a half, the county functioned outside the law, and as a special booby prize, lost money—estimated by some at the rate $3 million to 4 million per year—in state housing and disaster relief funds.

And that's where things stood for years. You've got no sites for affordable housing, so you get no certification and no funds, said the state. So be it, said the county.

Santa Cruz County acted vehemently to preserve its privilege to do so. The county sued the Association of Monterey Bay Area Governments (AMBAG), for assigning it "too much" housing. The county lost. It pursued a second-unit restriction case all the way to the California Supreme Court, where it also lost. The county red-tagged individuals, by the thousands, who had sneaked in new bedrooms or backyard units. County officials rejected even development proposals at permitted densities, claiming that those parcels had been "zoned wrong."

It appeared for over a decade that the county's willful violation of state housing law was unbreakable. Enter Gretchen Regenhardt.

'Enhanced Affordability'
Four years into the 2001-2008 state planning period, when Santa Cruz County government had still done nothing to zone at least some residential land for the lower-income half of its residents, Gretchen Regenhardt of California Rural Legal Assistance (CRLA) filed a lawsuit on behalf of a number of them. Saldana v. County of Santa Cruz, as the suit was named, specifically highlighted the plight of Ernestina Saldana, a wheelchair-bound woman who could find no housing in the county with a stove low enough for her to use safely. Regenhardt claimed that Saldana's plight arose from the fact that no such housing was being produced. And that, in turn, was because the county had entirely eliminated sites on which it could be produced in the first place.Several twists and turns later, after the county shifted the case from court to court and filed a partial and unsuccessful appeal, the case returned to local court, where, in July of 2006, judge Robert Attack agreed with Regenhardt: the county, in refusing to designate specific sites at appropriate densities for low-income housing, was in violation of state law, and had 90 days to get with it.

With the county facing a firm judgment and the threat of another suit by HCD (delivered in person by HCD's head honcho at an AMBAG meeting), activity quickened. The county offered to overlay a large number of acres, and permit people to apply to build affordable housing on already developed parcels there, should they open up. No you won't, replied the state: you'll zone specific undeveloped sites. OK, as long as the Board of Supes can cut the density by 25 percent at the final stage if need be, jockeyed the county. No cuts allowed, said the state.

Well then, we'll directly rezone 27 acres, said the county. Nope, said the state, you'll need at least 30. Thus came the current rezoning project, and with it, the 40 percent affordable requirement. But for-profit developers, whose participation is essential to getting enough affordable housing built that the county doesn't get further dunned by the state, brought the county numbers that showed the goal improbable, even with subsidies.

And at that point the county asked them a question: What if we change what "affordable" means? What if the moderate-income designation, which usually extends up to 120 percent of median income, were stretched upward to 150 percent? And low income, which usually tops out at 80 percent of median, were to extend up to 100 percent? In other words, what if we "enhanced" the affordability ranges?

That's still pushing it, answered local developers, since costs are so high that virtually all new housing comes in at around 300 percent of median. But it's much closer. We think we can pull it off.

So this summer, county planning director Tom Burns, planning staff and a number of local developers presented the Board of Supervisors with the idea. The board approved it, and thus was "enhanced affordability" born. In the new framework, a family of four with a household income of $120,000 can be considered "moderate income," and a family of four making $81,000 may qualify as "low income" and move into the new county-subsidized housing. What happens to people making less than that—with so many more people competing for the public assistance—is anybody's guess.

Re-enter Gretchen Regenhardt.

Welfare for the Well-Off?
"This 'enhanced affordability' is inherently self-contradictory," Regenhardt says. "These sites are supposed to be available to low- and very-low-income people." Instead, because of the stretched-upward thrust of the redefined affordability ranges, "now you've got money going to above-moderate-income households. Public money. To for-profit developers."

And in the lower range, she says, "We've substituted moderate income for low income." And so then, the $15 million the county has promised "isn't available to the low- and very-low-income people it's supposed to serve."

This aggravates Regenhardt, given the county's failure, over several decades, to provide any sites at all for such housing.

"The county has a surplus of sites for above-moderate-income housing," she points out, since over time it has zoned virtually all residential land solely for single family homes. "And it has adequate sites for moderate-income." In short, "we already have enough sites to meet everybody else's needs."

The dilution of affordability standards especially irks Regenhardt because it simply appears to be the latest in an endless series of missed targets and delays.

"The county has never once met its obligations since 1999, when this planning period [later shifted by the state Legislature to 2001] began," she says. She points out that the rezone program was supposed to have created the new ordinance allowing higher density, and also identified the sites to be rezoned, by June. Not one property, she notes, has yet been rezoned.

"So here we are today," she says. "We're eight years out. The county has done nothing but delay. And now, with this 'enhanced affordability,' we might lose the money and we might lose the sites."

Regenhardt also notes that the state has not yet granted the county full certification for its housing element, and that the original Saldana case is still active, and can be followed up on with another court filing, at any time.

Slow 'er Down
Landowner and plaintiff Joe Ritchey feels, on the other hand, that the entire rezoning and affordability refiguring is happening too quickly. As a legal scholar whose background includes teaching constitutional law in New Zealand and South Africa, Ritchey takes a long view of these matters.

"This was rushed through without full disclosure as a result of the Saldana decision," he says. "The Saldana decision put pressure on the county to put into place what they have failed to do for nearly 30 years, and to avoid continuing to absorb that failure's financial consequences."

Ritchey makes clear that he does not oppose affordable housing itself, or the presence of people who live in it. "Twenty percent of my own rental units have tenants who are Section 8, and they are of fantastic character."

The process involved in the rezone project, however, concerns him on several levels.

"They changed the ordinance from something that was voluntary and not land-specific to something site-specific and obligatory on the landowners involved," he says—which indeed the county did do, at the state's insistence.

Ritchey is also concerned, as he mentioned in a June letter to the Board of Supervisors, that landowners alone will be stuck with both the cost of the 40 percent affordability requirement, and the resentments of neighbors of new high-density projects built near their properties. "The tone for the entire street, certainly our property, will be set by the affordable units," he says, "not the other way around."

Ritchey, unable to slow down the process, decided to sue on the basis of the California Environmental Quality Act, explaining: "I'm using the tools that are most available.

"Instead of trying to convince them to do an economic analysis of getting affordable housing built in the very limited period of time allowed by the Saldana decision, I'm asking them to do the CEQA study so as to allow time for a more considerate analysis."

And Ritchey makes clear that he does not hold the rapidity of the current process against county planning leaders. "[County planning director] Tom Burns has been dealt a very difficult deck of cards; he's not the one who's made the mistakes," Richey says.

Regardless, Ritchey and his Carmel Valley attorney, Alexander "Zan" Henson, are determined to stop the process until every possible bit of environmental study is done. "When I'm attacking a rezone such as this, I'm attacking not just part of it, but all of it," Henson says. And when he speaks of attacking, he's serious: Henson's legal actions several weeks ago temporarily delayed state spraying, across Monterey County, of the light brown apple moth.

Tom Burns doesn't see CEQA-based objections to the lawsuit as very strong. Responding to questions about it, Burns emailed this answer: "The ordinance review sets up the overall regulatory context for doing the rezonings. But much of the CEQA work will happen in the context of the individual rezonings—there's no other way to do it. ... Remember, the rezoning program is being set up for this and future housing element rounds, so it is only reasonable to address the CEQA details in the context of individual sites."

And whether or not Ritchey and Henson's lawsuit succeeds, Henson sees many opportunities for developing affordable housing in such a way that landowners are not solely impacted. Case in point: a city of Burbank program that allowed replacing single family homes, in certain zones, with up to five far smaller and more affordable condominiums per property. "It was so successful," recounts Henson, "that they had to put a moratorium on it."

Joe Ritchey, too, averred in his letter to the Board of Supervisors that regardless of the lawsuit's outcome, he'll find a way to contribute something to solving the local affordable housing shortage: "I will commit to attempting to make the Ritchey participation as environmentally friendly as we can financially justify. We will do our part to set a 'quality standard' for the future."

Norman Schwartz of Bolton Hill, developer of the 40 percent affordable apartments at 1010 Pacific and on Schaeffer Road, is also willing to stretch to produce results, which he knows are needed. Schwartz is developing a parcel known as the Miller property, owned by the same family that owns the Dr. Miller building housing the Caffé Pergolesi, directly across Soquel Drive from the Rancho Del Mar shopping center. "There is a need for for-sale housing and for middle-income housing, which will take some creative help from the county, but not much," he says. "We're trying to do it with the minimum possible subsidy, so as to have the smallest possible impact on county resources."

Ultimately, Burns sees differences over the speed of the rezoning, CEQA questions and even the 40 percent requirement as giving way to the more classic and longstanding hurdle: "The question is whether the neighbors will see the projects as too dense."

With all the wrinkles so far and those doubtless to come, Burns admits: "It's going to be a challenging program."

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