Pasadena Housing Director William Huang discusses inclusionary housing and rent control

Screenshot via Pasadena City Websites YouTube.

Location

Alhambra , CA United States

Last week we published an interview with William Huang, Pasadena’s Director of Housing and keynote speaker for Grassroots Alhambra’s affordable housing forum, to take place this Saturday morning. In part one, Huang outlined the affordable housing initiatives that Pasadena has taken on. Part two of this Q&A focuses on the pros and cons of rent control and how inclusionary housing ordinances are good for cities with multi-family developments like Alhambra.

Is inclusionary housing something Pasadena has been pushing? I know there was a state law that was passed because of a 2009 court ruling that was halting the application of inclusionary housing on a local level.

We’ve had inclusionary housing here since 2001. And it’s been very successful here. The recent state law, AB 1505, helps to protect inclusionary ordinances from legal challenges. Some jurisdictions suspended their ordinances and some jurisdictions who wanted to create a new ordinance held off until there was cleanup legislation at the state level that made it very clear that local jurisdictions have the right to have an inclusionary ordinance, if they so desire.

So Pasadena has been chugging along on our inclusionary ordinance. Our ordinance so far has produced over 500 units of affordable housing and developers have an opportunity to also pay a fee instead of develop units, so it’s generated over $20 million in fees that have been turned around to develop more affordable housing. Our inclusionary ordinance has been really, really successful.

Inclusionary ordinances have some really great benefits. One is that it helps to geographically disperse affordable housing, so they’re not all in one project or not all in one neighborhood. But they’re spread out, wherever market rate housing is being built, wherever multi-family housing is being built, you get a smattering of affordable units. It’s really positive in that way.

An appropriate place for an inclusionary ordinance is where there’s a strong demand to build condominiums or apartments. When the inclusionary ordinance was passed many years ago [in Pasadena], those who were against the ordinance said developers will never come back into Pasadena to build apartments and condominiums. And they were completely wrong about that. It does show that if you’re in a city where there’s strong demand for multi-family housing, that’s the appropriate place for an inclusionary ordinance, and that’s where the inclusionary ordinance can really bear a lot of fruit and generate a lot of units, without impeding development or dis-incentivizing development. But if you’re in a marginal area, and then you add this requirement, then it becomes a disincentive for anybody to do anything there.

Alhambra has a pretty strong demand for apartments and for condominiums. So if Alhambra were to adopt an inclusionary ordinance, you would probably see developers still building in Alhambra, because it’s a desirable place, a place where they can still make a good return and they would still produce some affordable housing, which the city wouldn’t have to pay for. So Alhambra is a place where I would think inclusionary housing – an inclusionary ordinance – should be given some real consideration. Because personally I think it could work in Alhambra, because you just look at how much multi-family development is happening in Alhambra.

Pasadena’s ordinance is 15 percent. So 15 percent of the units have to be affordable and then 85 [percent] are market rate.

Or they pay the fee.

Yeah they can pay the fee. And then the city uses that fee money – that money that gets paid doesn’t just go into the city’s general fund, it’s restricted for affordable housing. So that money then is used to develop more affordable housing.

We’ve generated a little over $20 million throughout the history of the program. Almost all of it has been spent on affordable housing. For instance, the two projects that I’ve mentioned – the senior housing project and the housing for homeless families – those both use inclusionary housing. And all these [accessory dwelling units] that we’re proposing to do, that’s going to be inclusionary housing also. So it’s been very successful.

And do you have to depend on state or federal subsidies for a lot of these programs?

Not on inclusionary. But when we build projects that are purely affordable housing projects, then yes. What we do is work with developers that are skilled at going after other affordable housing dollars like county dollars, state dollars, federal dollars, low-income housing tax credits, tax-exempt bond financing, things like that. So the financing for affordable housing is very complex and you need to work with developers that have a strong track record and capacity to be able to do that. You couldn’t just find a grassroots group of neighbors or a faith-based group of folks and expect them to be able to go out and pull together an affordable housing project. It’s just way too complex.

And I know that cities don’t really have redevelopment funds anymore. Where are the funding sources?

Right now, there’s quite a bit of funding for supportive housing [for the homeless]. That’s where a lot of focus is. If Alhambra had a site to build supportive housing, a skilled developer could get it funded very quickly. There’s plenty of money for that. For other kinds of affordable housing projects, it’s more difficult.

I know that there’s a rent control ballot initiative going around in Pasadena. I was wondering what you think of rent stabilization and rent control and stuff like that.

The city hasn’t taken a position on it, but there’s a lot of information out there on rent control, both the pros and the cons. And I don’t know if you’ve seen the recent Stanford study on rent control. It looks at 20 years worth of data for the San Francisco rent control ordinance. In my opinion, it’s not biased and it just sort of looks at the data. What it shows and what I believe is true is that rent control does provide some immediate short-term, medium-term benefits. Definitely, it does. Especially to the people who are in the rent control units when rent control gets adopted. They’re the ones who benefit the most, because then the rent can only go up at a pretty slow rate. However, the longer term impacts on rent control also are important. It means that people don’t move out of apartments as quickly as they could or they normally would. Because they have a great deal on it, so why would they want to move out?

It also means that developers are incentivized – at least the way rent control laws are right now in California, rent control can only apply to older apartment buildings, buildings built before 1995. So for the property owners, they sometimes decide to tear down their old building and build a new building. Because that gets them out of rent control. So then you start to see the older housing stock, which is the more naturally occurring affordable housing stock, start to get eroded. And then there are landlords who maybe see an opportunity to stop investing in their building if their building is rent controlled. They don’t maintain the properties as well. They sometimes try to force out tenants, because every time their unit turns over, they get to move their rent up to the market rate. And so there are kind of unintended consequences of some unscrupulous landlords not maintaining their buildings and trying to do things to force out their existing tenants.

And the other thing I’m very concerned about is we run a Section 8 program here. Every month, we pay the majority of the rent for about 1,400 households in Pasadena. Well, about 80 percent of those folks are living in pre-1995 buildings. So to the extent that the landlords are gonna start to tear down these buildings and replace them with new buildings means we’re gonna lose opportunities for our folks to be able to use their Section 8 vouchers here in Pasadena. Because the older housing stock might start to get reduced.

So there are very strong and committed housing advocates that are on both sides of rent control, some very strongly for and some strongly against it. Some people will point to it and say, “Well, look at all the jurisdictions that have rent control.” Every single one of them has a very severe housing crisis still. So rent control is not the sort of silver bullet that cures it. Especially because the name “rent control” makes it sound like, “Oh it’s gonna control all rents.” It doesn’t control all rents. It only controls rents on these older apartment buildings. So it produces these kind of incentives to do all kinds of things. Abuse your tenants, not invest in your property or just tear the buildings down, or use them for something other than housing, pull them off the market, use them for Airbnb.

But people are getting crushed by increased rents. So people are looking for relief right now. They’re not looking at 20 years from now, what will be the impact? They just need assistance right now. And I totally get that.

I personally like inclusionary ordinances better. If you’re in an area where there’s a lot of market rate development, inclusionary ordinances are a really good way to go. But right now the housing crisis is so severe, that a lot of people say we just need to do everything. We need inclusionary, we need rent control, we need to build more, we need all these kinds of things. All at once.

This interview has been edited and condensed.

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