Dozens of Encinitas residents packed the house for a five-hour City Council meeting back in July 2014. They came to upbraid city officials for letting developers use a state law meant to increase low-income housing in Encinitas.

The two parties defending the law might seem like an odd couple: a representative for private, for-profit developers, and a low-income housing advocate.

The Encinitas residents were determined to end the imposition from the state that was undermining their preference to rein in growth in Encinitas. Many of them have lived in the city for decades and don’t want new developments or density to change the Encinitas they know and love.

At issue is the state’s density bonus law.


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Originally passed in 1979, it allows private developers to build more homes on a property than city restrictions allow if they agree to build some low-income homes in their project. It also lets them build less parking, taller buildings or other deviations from city restrictions that make the project more profitable in exchange for building low-income homes.

That’s why both affordable housing advocates and developers like the law: It lets private developers make more money if they build homes for poor people.

The city of Encinitas has spent years trying to get around this law.

In the past several years, the city has been sued multiple times for manipulating the law on individual projects that tried to use it, and with citywide policies that would make it harder for developers to consider it as an option. The city passed some of these restrictions even after officials were presented with evidence they may be violating state law.

City leaders haven’t been bashful about their attempts to circumvent the law. They’ve routinely said one of their top priorities is finding ways to disobey it.

Encinitas is unique in its defiance, according to people throughout the state. While other cities may have issues with the state density bonus law, no other city has tried so hard to evade it.

For instance, in both 2014 and 2015, city staffers listed this among their top legislative priorities at the state level for the year: “Seek opportunities to regain local control over state-imposed density bonus law.”

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Kristin Gaspar, the mayor of Encinitas and a candidate for county supervisor, said one reason the issue comes up so much is because the city’s development policies are already so restrictive that the state law is one of the only ways to make new projects profitable.

Encinitas hasn’t seen much new, low-income housing built in recent years. But most of the affordable homes developers have built were a direct result of the state’s density bonus law. Since 2008, developers built 53 total homes reserved for low-income people; 39 of those were due to density bonuses.

“In many respects, Encinitas is the poster child for why density bonus law exists,” wrote David Meyer, a local developer, in a letter to the City Council in October threatening to sue over the city’s implementation of the affordable housing law.

Meyer followed through, and is suing the city over policies he says are aimed at undermining state law. The city was previously sued by a development-industry group in 2014, causing it to drop some of the policies that lawsuit challenged. Meyer’s suit is over the remaining restrictions not included in that settlement.

Meyer said the San Diego Volunteer Lawyer program reached out to him about possibly intervening in the lawsuit. The organization also contacted Community Housing Works, a nonprofit, low-income housing developer, last week to help find prospective plaintiffs—low-income residents of the county that need affordable housing.

Residents are hostile to new development in Encinitas, density bonus or otherwise.

The city has down-zoned property since the 1980s, making it difficult to build more, smaller homes. It is the only city in the county that is still out of compliance with a separate state law that requires cities to show where they’ll allow new affordable housing to be built. Even a plan to have residents convert existing granny flats into low-income housing units flopped.

That night in July 2014, the city was about to pass restrictions that would make it nearly impossible to use the law in the first place, instead of having to fight every project that tried to take advantage of the law.

“Why are you doing this?” said Michael McSweeney, the San Diego Building Industry Association’s senior public policy adviser, of the proposed restrictions that passed that night. “Density bonus is basically the one tool left in the toolbox to provide affordable housing.”

His comments evoked laughter from the residents – to them, it was absurd that the density bonus law could result in anything positive, and they doubted the BIA’s sincerity in its concern for affordable housing.

“Now, now,” Gaspar told them. “I know it’s late at night and we’re all a little grumpy. But let’s be respectful.”

Laura Nunn, policy director at the San Diego Housing Federation, a nonprofit that advocates for low-income housing, also spoke at that meeting.

“It’s important to note that the people that these units are built for are the people that are contributing to your economy and your community by working here, and by providing even one unit for somebody who is not fortunate enough to be able to afford here without a little bit of assistance, you’re helping to make a better and more diverse community,” Nunn said.

The Council didn’t listen. It approved the new restrictions. Now it’s being sued for the second time.

♦♦♦

Both City Council members and residents who want to make the law impossible to use in Encinitas say the measure just doesn’t work in expensive, coastal cities without much land.

In places like downtown San Diego, where developers can build larger projects, the use of density bonus can result in dozens of extra affordable homes at a time. But in Encinitas, where parcels of developable land are small and various restrictions ensure developments will be small, that means the low-income components of those projects will always be minimal.

“The intent of the density bonus law is to provide affordable housing, but that’s not the way it works,” said Gerald Sodomka, an Encinitas resident, at an August 2015 Planning Commission hearing on the new density bonus ordinance. “The builder uses that bonus to build market-rate housing, so we’re not getting affordable units out of this law.”

But that argument misses the point, according to a February report from the nonpartisan California Legislative Analyst’s Office. The report said the state needs more new market-rate units – in addition to more low-income housing – to help with the housing affordability crisis. As these new homes age, they will become more affordable in the future, the report said.

The shortage of market-rate units also means high- and middle-income families will move into lower-priced housing, since there isn’t much available in their price range. That pushes people with lower incomes out of neighborhoods, according to the report.

That night in July 2014 was Encinitas’ first attempt at passing policies to limit the law’s use.

Many elements of the policy mimicked strategies laid out in a letter a few months earlier from the lawyer of a group of residents who opposed a specific project that used a density bonus.

The lawyer accused the city of misapplying the state density bonus law. He called for a “complete audit and overhaul” of the city’s density bonus regulations.

The Council proposed changing the way it calculated how many additional homes a developer could build under the law—it would have meant allowing developers to build fewer units. It also required that developers prove to the city that each and every incentive requested was necessary for the project to financially pencil out.

The city tried to decrease the amount of land within a property that developers could actually build on by putting additional environmental restrictions on properties. It also required the low-income units to be either 75 percent the size of the often million-dollar, market-rate homes in the project or have a minimum of 1,500 square feet, 3-bedroom, 2-bathroom and 2-car garage – whichever is bigger.

San Diego’s Building Industry Association sued. That lawsuit was settled at the expense of $350,000 to city taxpayers. After the lawsuit, several of the policies limiting the laws use were dropped.

But the city refused to give in on two of them.

In October 2015, the city enacted a new density bonus ordinance that still contained the provisions that changed the calculations for how many affordable homes could be built, and that required developers to show the city their finances for density bonus projects.

There are multiple calculations done to figure out how many additional homes the developers can build, and the end number is often a fraction. Encinitas decided to always round down on these calculations. This “rounding down” issue has been a part of three lawsuits against the city since 2009.

The difference in rounding down for one density bonus project, Desert Rose, would have been building 15 homes instead of 16 homes.

In his lawsuit, Meyer says state law is unequivocal on this matter.

“All density calculations resulting in fractional units shall be rounded up to the next whole number,” the law reads.

But Encinitas City Council members say they think the law is unclear.

The city even asked its lobbyist to clarify the law up in Sacramento. When policy and legal counsel told them they should round up, the city still decided to round down.

“In short, legislative counsel doesn’t see any ambiguity in the law related to how density is calculated,” Jonathan Clay, the city’s lobbyist, wrote in an email.

Time and again, city officials have been told that the law says their calculations should result in more homes. Time and again, the city has done the opposite.

In 2009, the city was sued for rounding down the calculations for a density bonus project. This was the first time the city was sued for not properly implementing the state law. The city settled, agreeing to round up for that project. That same year, the city’s own planning department issued a memo, saying the city’s policy should be to round up for all density bonus projects – something that has been ignored by the current City Council.

Not only did the Council continue to ignore that policy, Councilman Tony Kranz said during a March 2014 Council meeting that the law was very troubling.

He said the city should “figure out a way to discourage people from invoking the density bonus law.”

The city also decided to make developers prove they needed additional incentives for things like lower parking minimums for the project to work financially.

This “density bonus report” the city requires makes developers “demonstrate that any requested incentive results in identifiable, financially sufficient and actual cost reductions to the housing development and is required in order to provide affordable rents or affordable sales prices.”

A state agency sent a letter to the city of Berkeley in 2006 warning that it was illegal to ask developers for the financial information that Encinitas is now requiring.

“It’s certainly known throughout the industry that Encinitas is hostile,” said Meea Kang, president of Domus Development in Sacramento.

Kang worked on a bill last session with Assemblyman Ed Chau (D-Monterey Park) that included provisions to reduce parking requirements for density bonus projects and, at one point, included language clarifying that cities should round up.

The city of Encinitas lobbied against the bill and sent Chau a letter in June 2015, requesting that the bill give jurisdictions the ability to choose how to round the calculations.

“We had a provision in there that said round up and we had to take it out because in every meeting, the Encinitas lobbyist was in there yelling about it,” Kang said. “We ended up dropping it.”

Despite dropping the language, the state’s legislative counsel wrote Chau a letter in December, saying in its view, the policy would be to round up.

Former Encinitas Mayor Teresa Barth, in the same March 2014 meeting, said the California League of Cities, which also lobbied against Chau’s bill, had shown interest in Encinitas’ concerns with the law.

“But it seems like there aren’t many cities in the state that are as interested in this as us,” Barth said.

The city requested that the state attorney general weigh in, but the attorney general’s office ultimately decided not to because of Meyer’s lawsuit.

“Encinitas should just be ashamed,” said Kang. “I don’t think there is another city that is quite out there the way Encinitas is. There are a lot of communities that say ‘hell no’ to affordable housing. But they’re not saying, ‘You can’t follow state law in our city.’ That goes a little above and beyond.”

    This article relates to: Government, Housing, Must Reads

    Written by Maya Srikrishnan

    Maya Srikrishnan is a reporter for Voice of San Diego. She can be reached at maya.srikrishnan@voiceofsandiego.org.

    15 comments
    Matty Azure
    Matty Azure subscriber

    Housing and zoning laws?  How funny!

    Signed,

    Pardee Homes

    Bill Stoops
    Bill Stoops

    Hardly surprising when laws that violate market conditions of supply and demand are tested, stretched, or ignored.  Legislating morality is wrong headed, and doomed to violate rights.  No one has a right to someone else' property, nor is anyone else morally obligated to suffer/ lose money,  or live in non-preferred manner so someone else can.  It is not surprising that people that paid market prices for houses don't want to see degrading impacts of traffic, noise, or density impact the market price of what they paid for.  Anytime legislation flies in the face of market driven choices, freely made by people, trouble will follow, as rights are violated by the legislation.

    Gerald Sodomka
    Gerald Sodomka

    Where to start?  The article is very one-sided and contains some factual errors. First the writer doesn't clearly distinguish between affordable housing and market rate housing.  The Density Bonus Law is very good at creating market rate housing and very bad at creating affordable housing.  In Encinitas new market rate housing in the area that the mentioned developer is suing over means houses to sell at $1.5 to $2.5 million.  All the BONUS housing in the Density Bonus Law is market rate.  The developer commits to building a very small number of affordable units, usually in the range of 1-3 units to get the increase of 35% in the number of market rate units over the normal zoning  The figure of 53 units quoted by the writer of inclusionary and density bonus affordable units built since 2008 is pitiful when SANDAG has assigned Encinitas 1300 affordable units to be built.  But the profit to the developers who have built the market rate units is extraordinary.  The impacts on infrastructure and traffic come from the total number of units built, not just the affordable units. 

    The truth is that in high-priced land areas like Encinitas a significant number of affordable units will never be built without public subsidy.  The Density Bonus Law is a poor way to subsidize, except as a way to subsidize profits for the developer with the additional market rate units allowed.  The city is struggling with the Housing Element Update and proposes to use a "proxy" zoning of 30 units per acre.  The state Department of Housing and Community Development allows this zoning to count as affordable housing, even if it is NEVER built or built with market rate units. It only needs to be put as R-30 zoning on the map.  The city will increase density and all the urban ills that go with it, including CO2 emissions and strain on city resources, and get NO guarantee that affordable units are built.  It could end up as 1300 luxury condo units.


    When Assemblyman Ed Chau introduced AB 744 with changes in the language of how to round density calculations, it was to clarify the language, which is not at all clear, in spite of the comment that it is "unequivocal."  Meea Kang admits this.  About one third of cities and counties in California round down on base density.  It's not just Encinitas, which put it into its Municipal Code with incorporation in 1986.  The clarifying language was taken out of the bill to avoid changing the law with an existing lawsuit.  Since 2009 the city has been sued three times, twice by the same developer and once by the BIA.

    One developer called Encinitas "a density bonus magnet."  The writer should do a comparison of entities in San Diego County in order to compare the percentage of density bonus units built versus population size.  The writer and others quoted in the article might be surprised. 

    Janet Shelton
    Janet Shelton subscriber

    "As these new homes age, they will become more affordable in the future, the report said."

    I laughed out loud at that one.  Look at the trajectory of housing prices in San Diego.  The house I bought in Mira Mesa for $60K in 1978 is now going for $600K.   And being the cheapest houses in a highly desirable area generally makes them go up more than the expensive ones.  No way that putting these units in small coastal towns is going to create affordable housing.  I am all for affordable housing and surely we can make changes in our laws to actually build housing that are affordable.

    Jean Bernard Minster
    Jean Bernard Minster

    Dear Ms. Srikrishnan:

    I am astounded by your lack of understanding of the conflict between the citizens of Encinitas and the BIA and developers like Mr. Meyer.  The argument made by the citizens is that the density bonus law, as written and applied, only produced nominal affordable housing, and a very large number of densely packed market-rate houses. I have written numerous letters to Legislators and Senators explaining that they were being taken for a ride by the building industry, and not achieving the noble goals they set for themselves. More recently Mr. Meyer addressed the Encinitas Planning Commission, and in a remarkable offensive way, boasted that he and his firm were involved in all stages of writing the law, and the subsequent amendments, and that any departure from his interpretation of the law would result in a  lawsuit—which it has … This is hardly a demonstration of democracy in action, and your article completely missed that critical aspect of the lawsuit.
    We have been warned by politicians —notably politicians very much in favor of affordable housing—  that the building industry has vastly larger resources than citizens and cities, and that our arguments were quixotic at best, as citizens and cities would be easily overwhelmed by expensive litigation.   Now I can tell that they have gotten to you as well and coaxed you into writing a remarkably one-sided story, which is more akin to propaganda than to journalism.

    Best regards,

    brian gulino
    brian gulino subscriber

    You need to distinguish between housing for poor people and high density housing. Increasing the density of housing in Encinitas, which is mandated by state law, means that some areas of Encinitas will have more expensive condominiums.  Given the desirability of the area, non of the high density housing will be affordable for poor or middle class people. Many of the units referred to in your lest of low-income housing sell for over a million dollars. A two bedroom condominium, with HOA fees of $800 a month and a purchase price of over a million dollars is not low income housing. Its not even middle class housing.

    bgetzel
    bgetzel subscriber

    @brian gulino You are grossly mistaken. according to state law, and provisions of local laws of cities that do not fight the bonus, a developer that uses the density bonus must prove that the units are affordable to residents earning less than a specified percentage of the local median income. There is even a formula specified on how that should be calculated. Inclusionary housing has been a succesful method of providing low income rental and ownership housing all over the state. 

    brian gulino
    brian gulino subscriber

    @bgetzel @brian gulino  The reporter listed the houses built in Encinitas which qualify under the density bonus. Included in the list, which she refers to as, "low income housing" are these::

    687 South Coast Highway a 900 sq ft condominium - sold in 2015 for 599K. @ $731/sq. ft. $433 HOA fee.


    560 Requeza,  a single family residence, sold for 2.1 million dollars.


    State law mandates density increases but says nothing about the price that the housing will ultimately sell for. In a community as desirable as Encinitas, increasing the density doesn't lower the cost of the housing significantly.


    I stand by my original post. Complying with this law will not benefit any poor people.

    marco gonzalez
    marco gonzalez subscribermember

    @brian gulino @bgetzel Brian - the designated affordable units must be maintained at affordability rates determined by HUD for the region. There are different density bonuses depending on how "affordable" the units contributed are designated. While the rest of the units in the higher density development may not be artificially depressed in price, the affordable ones are deed restricted as such, and escrow must confirm the status of purchasers in order for sales to close.

    tarfu7
    tarfu7 subscribermember

    Thanks for covering this interesting issue.

    Peter Bridge
    Peter Bridge subscriber

    Maya, do you have any training as a journalist?  I strongly suggest that you read this:  http://grammar.yourdictionary.com/grammar-rules-and-tips/tips-for-writing-in-a-newspaper.html


    Your article rambles, teases, hints, and in the fifteenth paragraph finally says who ONE of the plaintiffs apparently is, although earlier it says that there are two parties defending the law.  No, somebody is suing, not defending. You never tell us who the second party is.  You hint that it's maybe Community Housing Works, but you never really say.  At least, I couldn't find it.


    Please learn to write a news story.  Who, what, where, when, how, why ....  in the first five paragraphs.  WHO is suing?  Why?  Then you can build back story.   

    tarfu7
    tarfu7 subscribermember

    Not every article needs to take the format of a "hard news" story like you described. Based on this piece's length, use of section breaks and overall tone, I would say the author was going for more of a narrative approach than a traditional hard news approach.

    There is certainly more than one acceptable format in the field of journalism.

    Oh, and maybe stop being so mean?

    Peter Bridge
    Peter Bridge subscriber

    @tarfu7  Affordable housing is a subject I take seriously.  The City of Encinitas is intentionally breaking the law, and this story deserves better treatment. The second paragraph refers to two parties "defending the law", although they apparently are not defending, but suing.  The city will need to do the defending, and this will probably cost the city another settlement.  The article -- I think, correct me if I am wrong -- never identifies the second party. 


    By the way, my suggestions were meant seriously, not nastily.  There is good information about how to write news in that web page.  This is not a story about hem lengths or Kardashians.  Read the headline -- this should be a hard news story.  Yes, I once was a journalist.  I actually know what I'm talking about.     


    This article is just plain sloppy.

    phil weber
    phil weber

    It is a bad law as use by by developers to get around what the community wants (the people who live, own a home and have set down roots)

    It creates more expensive housing does not increase homes for the low income ( if 50K a year is ow income)

    It's great for the developers high profit

    It socializes all of the detriment's and privatize all the benefits


    The city and the Community is left with increased traffic overcrowded schools, no money for increased fire or medical services,


    And many times decrease property values


     Affordable-housing set asides. Much new multifamily construction is built under programs where developers get a tax abatement in exchange for setting aside a fraction of the building for affordable housing.

    That's great for people who win affordable housing lotteries and get below-market rate rents. But the set-asides also reduce the returns to developers, which reduces the amount of housing stock that gets built, which drives up market rents for everybody else.


    This not a solution for healthy sustainable communities.  This is a problem with income and companies not paying their employees enough money. Teachers police and fire should be able to live in the neighborhoods they serve, should make the money they deserve




    bgetzel
    bgetzel subscriber

    @phil weber Tax abatements are only given to non-profit developers of affordable housing. If the project is a mixed-income one (i.e. has market units as well as affordable units), only the units that are affordable get the abatement. Most of the comments made by the readers are widely inaccurate and are from people who are not well informed on this issue.