Citizens Agenda: What Can WeHo Do to Encourage Apartments Over Condos?

During every West Hollywood City Council election campaign, WEHOville invites the residents of West Hollywood to write us and note the issues that matter to them, the issues they want their candidates for City Council to focus on.

Today we are publishing the fifth in a series of questions from the Citizens Agenda and answers to them from incumbent candidates and challengers. New questions and responses will be published each Monday. Noted below are those candidates who have not responded questions from the citizens of West Hollywood.

Previously published questions, and answers, can be found here and here and here.

5) Increasingly, new developments are condominium projects rather than apartment buildings. That means the housing being built is much more expensive. What can the City of West Hollywood do to incentive developers to build apartment buildings, rather than condos, particularly inside our neighborhoods, and not just on the main thoroughfares?

John D’Amico

I’m not sure I agree with the premise of the question; rental housing construction is less expensive than condo construction? It is not.  Industry wide, the cost of housing construction is not significantly different for apartments vs. condos.  And across the city many times more apartments than condos have been built in the last 10 years.  There is nothing that prohibits a builder/developer from building apartments or smaller units, in fact we have a maximum unit size of 1,200-1,500 square feet to ensure that overly large units do not flood the market.  And we have a further requirement that 90% of the allowable units are built on every site – so that we replace units as they are taken away plus more.  And condo owners can rent out units to tenants as has been the case in the city since cityhood. 

There are programs that help first time buyers with no or low down payments and loans that help to make affordability within reach.  But nonetheless, the costs at every point of entry for market-rate new construction is very high.  As I have said many times before, “West Hollywood does not have a luxury housing crisis. We have an attainable housing crisis.” And until there is sufficient broad-based development that fills in the 25 year housing gap across the region, West Hollywood’s market rate housing costs will continue to be among the highest. 

It is unlikely that an affordability driven incentive program for apartment construction would result in the kind of ‘more affordable’ units the question suggests.  A financial incentive would have to come with stipulations that the rents remain affordable, which in turn would require income-based qualification for those units.  That is the very definition of affordable housing, which we are already building through our affordable housing non-profit developers – fully 20+% of our new housing has been affordable units.  For profit projects are commonly incentivized with bonus incentives to build additional units when offering additional affordable units  (above the 20% threshold), but none of this works to lower the market rate costs of renting a unit in a newly completed building.  

Currently, the city zoning code does not stipulate a difference between an apartment building and a condo building in terms of amenities and construction type(s) for entitlement.  If there were sufficient reason the city could identify various differences and cause a project to choose between rental or condo designation earlier and permanently.  My sense is that more projects would choose to design themselves to be condos because of the inherent flexibility to rent the building out once completed – and defer the sales to another day.  Once again having little to no effect on the overall availability of attainable housing.

There has been much discussion and insistence that micro-units and shared housing environments are best positioned to solve the affordability crunch.  I am sympathetic to the idea, given the fixed costs for housing construction. The biggest fixed costs being the building structure and the provision of parking – currently set at one parking space per bedroom – for buildings in all parts of our city.  In order to make this work we would need to reduce the residential parking requirement by half and double the number of units in a building; the fixed costs of development remain consequential.  And those costs are part of the calculation that determines the rental cost.

Let’s look at two possible scenarios.  A single 5,000 square foot plot on a neighborhood street.  

1. Current zoning:  allows five two-bedroom units each at 1,500 square feet  plus an affordable unit at 600 square feet  for a total overall building size including hallways of 10,000 square feet  requiring 12 parking spaces.  Typical cost at completion: $800,000 or $3,600 per month to rent plus the affordable unit at a fixed rate of approx. $6,502. 
2. Micro-unit option.  Change the zoning to allow 10 single micro units  of 400-500 square feet plus two affordable units of 600 square feet for a total over all building size of 10,000 square feet including enhanced public amenities, requiring 12 parking spaces (…if City Hall reduced the parking requirement by 50%).  Typical cost at completion is $400,000 or $1,800 per month to rent plus the affordable units at a fixed rate of approximately $650.

Under scenarios like this there are more small, single units, many without parking, and the cost per bedroom is the same or slightly higher in the micro-unit scenario, but it is a separate unit.  Certainly, there is a market for some units like this.  Neighborhoods may not like that we are building multiple or more units with limited parking in areas that are already stretched for parking options.  Tenants tend to want more space of their own, but not always.  So this is a half measure with limited appeal. 

I think the overall question – is there a way to cause less expensive units to be built in a city that demands top rents within our region?  The short answer is ‘no for now.’  Our new construction rental costs are typically $3 to $4 per square foot.  The market sets those rates, and they will rise and fall with the state of the economy.  

That means that in February 2019,  an 800 square foot apartment in a newly completed building can cost upwards of $2,400 to $3,200 (while similarly sized, existing rent-controlled apartments often rent for $1,400 to 2,000).  And unfortunately, what we have seen is that new construction has caused the rents of existing nearby buildings to rise more rapidly.  This phenomenon is an unintended consequence of the new construction – once the unit is vacant and returned to market rate under California’s Costa Hawkins regulations it is rented for more than a comparable unit in a neighborhood without new construction. 

Costa Hawkins is a STATE LAW that sets some requirements for the 15 cities in California with rent control—West Hollywood included.There are three main provisions:

• It protects a landlord’s right to raise the rent to market rate on a unit once a tenant moves out.
• It prevents cities from establishing rent control—or capping rent—on units constructed after February 1995. 
• It exempts single-family homes and condos from rent control restrictions.)

 We all hoped Costa Hawkins would be overturned during the 2018 election to help bring some stability back into the rental market — an effort that the entire Council has worked on during every legislative session to try to modify or overturn.  And one that I championed in the legislature with Assemblymember Bloom and Senator Allen and worked with our lobbyist to try to overturn, and will try again in the upcoming legislative session.  

The brightest spot in all of this is that West Hollywood has been collecting affordability ‘in-lieu fees’ and demanding 20% of all new units in larger buildings be affordable,  That has resulted in over 800 new permanently affordable units with an additional 850+ Section 8 vouchers for residents to use to remain in their housing. 

This is an incredible statistic.  If Los Angeles had adopted similar legislation, our current housing and homeless crisis would not be nearly as severe.  More housing is the antidote to our housing crisis, and for the time being more affordable units and protecting our rent-controlled units in West Hollywood will be our solution to the affordability crush. Our best hope for maintaining maximum affordability as a part of the West Hollywood housing continuum is to focus on seismic and sustainable upgrades to our existing housing.  Requiring landlords and property owners to upgrade buildings over time to achieve new levels of safety and health with respect to buildings while keeping affordability as part of the structure of the housing continuum will mean that the vast majority of the city’s units will be attainable, while the city continues to develop deeply affordable units (and vouchers) and the new truly market rate rental units will find their own balance as part of the continuum. If you would like to talk more please contact me 310.498.5783

Jack Cline

No response.

Tom Demille

We have to bring our residents together for this important issue. Our city’s survival depends on this. Developers have gone roughshod all over our city. We can have both if our city, with the residents approval, offers tax breaks and other incentives to have micro units for our young people wanting to be part of our family  and developers to build apartments as much as they do condos.  Have to ask, why haven’t our council made this easier years ago? It’s because they have lined their pockets with money, money and more money. That stops on March 5th.

It’s time for integrity in our local politics. As a candidate for this office for the fifth time over the last 20 years, I’ve never taken a dollar from anyone. We can have all types of housing in our community if we all come together and demand that all city councilmen and women do the right thing for West Hollywood. Let’s not leave anyone behind who works hard, plays by the rules and has a heart full of love and respect.

Brendan Hood

For starters it can free more property for apartment construction by allowing more density across the city, not just on Sunset or Santa Monica boulevards, through changes to its residential zoning.  It can also set lower inclusionary housing requirements for developers who agree to build apartments and not condos, increasing the number of both market rate and affordable units.

Lindsey Horvath

In the past, the courts did not look favorably on the city in a case where there were different requirements in the code for condos and apartments. Later on, the City removed development standards that had been in the code treating condos and apartments differently. However, what’s legally possible is yet to be determined by our City Attorney.

We have seen residential projects increasingly pull tract maps for condominium housing. However, it’s important to note that new housing developments often pull tract maps for condominium housing for future flexibility for the property owners, not because they intend to sell the units as condos. Many new residential developments will operate as apartment rentals in the city for some period of time – potentially forever – even though the property owner exercises their right at the time of development to pull a tract map for future sale purposes.

That said, it is critical we work towards innovative housing solutions overall to provide a variety of options for our different demonstrated housing needs, including assisted living facilities, live-work housing and micro unit development. Some housing options will require changes to the code, which I would support to improve our quality of life and address present-day economic realities. Developers will work within the guidelines we provide, so it is up to us as the leaders of this city to remain actively engaged and dedicated to protecting current residents while responsibly and thoughtfully managing our future growth.

Duke Mason

I outlined much of my views on this topic in answers to earlier questions. I think we’ve made it cost-prohibitive for developers to build apartment buildings vs. luxury condos. The regulations and restrictions, such as parking requirements, are punitive, and we need to look at streamlining them.

I understand that some are concerned about the impact more density will have on traffic congestion, which is why I’m in favor of building more housing that’s easily accessible to public transportation. That way we’re appealing to people who aren’t necessarily dependent on cars (young people and seniors, for instance), who’ll want to live in these units and use our various forms of public transport.

Lauren Meister

The question does not quite portray the landscape accurately as rental units have been built in the city – in residential neighborhoods as well as on commercial corridors, and they too have been expensive in terms of monthly rents – with no benefits of ownership or investment as there are with condos.

That said, there are incentives that could be offered, but careful consideration must be given to results that could exacerbate other community concerns. The city could incentivize the building of apartments by allowing an in lieu fee rather than requiring affordable units onsite for any size project, but then there would likely be no affordable units onsite. The city could incentivize the building of apartments by allowing a reduced number of required parking spaces, but then less parking could impact desirability of the units, or impact the amount of available street parking. The city could give additional height or density bonuses for apartment buildings, or reduce setback requirements (on top of the state bonus), but that would just aggravate the issues residents already have with lack of neighborhood compatibility (see the city’s R2/R3/R4 multi- family housing study).

One simple way of “incentivizing apartments” without those potential downsides would be to start allowing ONLY mixed-use projects with apartments to receive our current mixed-use bonus for residential units on commercial streets.

However, this is a complicated issue, and one could argue that our General Plan (approved in 2011) provided the framework for this outcome. Therefore, another approach might be to start by amending our General Plan to limit the current incentives that encourage large, high-end luxury units.

In general, our zoning (such as maximum unit sizes, maximum heights, increasingly generous rooftop projections and encroachments into set-backs) attracts bigger development projects that drive up land prices and require bigger investments. Since condos provide faster recoupment vs. longer-term investments for those big investors, it’s not surprising to see condos dominate the new market. Even when apartments ARE built, they still tend to be bigger and more expensive. That drives up rents for smaller units as well.

Our code also encourages bigger, high-end townhome style units with multiple stories – which tend to be luxury condos. They often skirt ADA requirements, not only making them cheaper to build, but less friendly to our stated goals to prioritize “aging in place.”

If we amended our zoning codes to produce more units that are smaller instead of fewer units that that are larger, new development might align itself more with the multi-family buildings that make up our existing older housing stock. Whether we’re talking about apartments or condos, we have a housing affordability crisis, and the last thing we need in West Hollywood is more luxury housing of either type.

The  incentives for residential units on commercial streets in our General Plan were sold to us as a way to take the pressure off residential streets. That hasn’t worked because residential property is cheaper to buy than commercial, and we maintained high density for development on our residential streets. When we increased and incentivized density for residential units on our main streets, we should have lowered it on neighborhood streets. We didn’t – but we can fix that. This and some combination of the other tweaks to our code could provide a more balanced mix of new development.

Again, it’s a complicated issue, with no easy solution – but one that deserves more attention.

Shawn Davis Mooney

No response.

Eric Jon Schmidt

No response.

Sepi Shyne

The single most important factor when I decide which developments I support is whether or not it adds or removes units from our total housing supply in West Hollywood. Basic supply and demand dictates that removing units increases price while adding units decreases the price. While the city zoning code has certain protections on this front, I support codifying stronger rules to require all new developments to have the same number of units or more as the previous structure on that sight.

Cities like Irvine and Santa Clarita have provided a road map to cost-effective, high-quality affordable housing via public-private partnership. By bringing public and private stakeholders to the table, Irvine recently opened a beautiful affordable development called Parc Derian that adds more than one hundred affordable units for students, seniors on fixed incomes, disabled individuals, and veterans. By building smarter and more dense with an emphasis on mixed-use buildings designed for walking or biking rather than driving, we can reduce traffic, reduce the cost of housing, and bring good, rent and mortgage-paying jobs right here to West Hollywood so the people who live here can work here.

Marquita Thomas

It doesn’t matter whether a new building is apartments or condominiums if the rent is too high and the units remain empty. This is happening all too often in West Hollywood.

West Hollywood’s zoning code does not distinguish between apartments or condominiums in establishing residential zones—so currently a building once approved can become either option.

To guarantee or encourage developers to build apartments rather than condominiums, West Hollywood should offer enhanced density bonuses for new developments that agree to make their units rent-controlled apartments by covenant, which will, over time, lower rents in the new construction and across the local rental market.