Why is everybody so afraid of inclusionary zoning?
The wonkish title for this affordable-housing program makes the eyes glaze over. That’s a problem, because housing has rarely resonated among voters as an important issue. Overdevelopment, though, has sparked voter revolution.
Some advocates who see inclusionary zoning as the key to solving the housing shortage have taken to shortening the name to IZ. Others prefer "inclusionary housing." Some, just among themselves, after hearing angry complaints from neighborhood groups and builders, came up with a sardonic list of options like "Housing for Them." Or "Social Engineering Housing." Or "Keep your cosmetic surgeon close but your gardener closer" — a reference to fears among mansion dwellers that they would be forced to make room on the block for bottom-wage workers.
Inclusionary-zoning programs vary in their details but have at their core a basic element: Builders get a "density bonus," allowing them to construct more apartments or condominium units than otherwise would be permissible, in exchange for pricing anywhere from 10 percent to 20 percent of units well below market rate. Similar programs have been in place for several years in smaller cities around California, like Pasadena and Irvine.
For four years now, Los Angeles has been mulling one version or another of mandatory IZ, which would mean that no builder of five units or more would ever again get a building permit without committing a portion of units to below-market-rate renters or buyers. Councilmen Ed Reyes and Eric Garcetti have been crafting a mandatory IZ program for more than a year, but they have been unable so far to put together the necessary eight votes. The reasons include staunch opposition from business and real estate leaders, who account for a huge chunk of campaign donations, and from homeowners and neighborhood groups, whose members do much of the voting.
Even supporters get bogged down in the details. Should developers be able to opt out by paying an "in lieu" fee? Should they have to put the affordable units in the same complex as the market-rate housing, to keep the place diverse, or should they be able to put up the affordable units in another part of town? Once a sub-market-rate unit is sold, can the owner build equity, or is it sub-market-rate forever? And what kinds of incentives should builders get in exchange for subsidizing their own developments?
In theory — only in theory — the density bonus and other incentives offered in IZ bring the builder enough extra revenue to balance out the loss the company will sustain from taking in less than market rate at sale time.
It used to be that builders and city officials would negotiate a package of entitlements and mandates for each project, with financiers and, recently, labor and community groups involved in the talks. That way, everyone knew the project would pencil out. Now many of the incentives have been passed into law.
While many builders happily work with the city to construct below-market-rate housing in exchange for a package of incentives, though, many fervently resist the prospect of mandates. IZ opponents say a mandatory program will put an immediate halt to new housing construction, and make the affordability crisis worse, because projects will no longer pencil out.
When Reyes tried to move forward last spring with a mandatory IZ plan, Central City Association president and CEO Carol Schatz told his council committee that they would inadvertently drive middle managers, office workers and wage earners out of the city.
"Somebody has to pay for it," Schatz said, meaning the buyers and renters of non-affordable units. "Market-rate units will be priced higher."
Ray Pearl of the Building Industries Association said the plan would create a new "hidden tax" on middle-class residents who don’t qualify for affordable units. "Affordability begins with availability," he said, and availability is provided by developers, not by the city.
Developers instead want to focus on the city’s incentives and in fact have their eye on the Holy Grail of incentives: streamlining and certainty. A clear, quick and final yes or no on a project. Preferably a yes. A City Hall permit and entitlement office of superstar managers who will circumvent L.A.’s notorious red tape, and automatic approval, as a matter of right, for any project City Hall hasn’t finished processing within, say, 90 days.
Many affordable-housing backers like the idea. "Why not?" said one advocate. "Anything to get the units built and the people in homes."
It’s the kind of idea that sends shivers up the spines of homeowner groups whose members have visions of bulldozers rolling over their hard-won density limits and carefully crafted community plans. Beginning with 1999’s charter reform and continuing to today, the city made neighborhood empowerment a top priority. How come the neighbors are suddenly considered NIMBYs?
Business leaders succeeded in getting Reyes and Garcetti to shelve their proposal last spring for a 90-day review by neighborhood councils. The real purpose of the delay, though, was to stall the process through the summer and fall so that the council members who will vote, and the mayor who will sign or veto, will catch a distinct whiff of a March revolt by angry voters.
