A local workforce housing project, which had seemed like an already done deal at the end of last year, has been scrapped, as Santa Clarita City Hall officials said earlier this week that changes in the bond market rendered it no longer feasible.
The project, which had been a topic of discussion and a handful of City Council action items over the course of last year, would have resulted in the city’s purchase of the 264-unit Skycrest apartment complex on McBean Parkway and transitioned the residences into rent-controlled housing for income-eligible residents.
The city defined income-eligible households as between 80%-120% of Santa Clarita’s median income of $80,000 per year, with the rent levels being specific to each resident and placed on a sliding scale based on said area median income. The regulatory agreement on the project also would have placed a limit on annual rent increases at 4%, prevented displacement of current tenants who do not meet the requirement, and placed preference on professionals working in Santa Clarita, residents who graduated from a local school, first responders, teachers and medical professionals.
The deal would have been made possible through the purchasing of $164 million of government revenue bonds, which city staff initially reported as having a repayment period over 35 years. However, the recent spike in inflation — the rate reached 7.5% in the month of January, the highest it’s been in four decades — which was then reflected in the bond market, resulted in the program’s contract being pulled.
“The bonds and the financing of that project is not moving forward,” City Manager Ken Striplin announced during the Santa Clarita City Council’s Tuesday night meeting. “The bond market changed and it’s no longer financially feasible.”
The decision was met with cheers from some members of the public who were in attendance at the meeting and in opposition to the project. During a particularly animated speech, one such critic of the plan, Steve Petzold, said the deal had not been properly scrutinized and that both the cost for the bonds and the actual maturation period on them was longer than had been previously reported.
“Nobody followed up and then it comes back to why nobody recorded the proper appropriate document,” Petzold said during public comment. “Somebody needed to follow up on this. I did. This was a 40-year bond, it was very expensive and you had no business approving this.”
However, while reporting that the project was not moving forward, Striplin challenged the assertions made by Petzold during the meeting, saying that the original deal, had it gone through, would have been good for the city in terms of increasing the amount of local affordable housing while also providing the city with a future asset down the road.
“It’s an investment in affordable housing. It’s an important investment in a future asset,” said Striplin. “That being said, once again, that deal is not moving forward because of the bond market and is no longer financially feasible.”
Striplin also said that one of the primary reasons for the deal being pulled was that the city was in fact doing its due diligence and that the city’s analysis showed that the numbers were no longer favorable given recent economic trends.