A statewide push for millions more homes notwithstanding, market forces and Sacramento policy were brought up several times Tuesday at Santa Clarita City Hall as the problems that plagued a plan to build affordable and rental units in a Canyon Country project.
The Santa Clarita Planning Commission unanimously agreed to give New Urban West more time to build out its 20-acre lot off Lost Canyon Road, part of a multiphase development first pitched in 2020.
The current understanding is that the developer will still build 50 affordable senior homes, which has been the hardest part of the project to finance, according to the developer.
The commission signed off on city planners’ recommendations for allowing: 7 feet between the units instead of 10; New Urban to build more homes before the affordable component is required; apartments eliminated in favor of fewer for-sale homes and detached condos.
The developer that originally called for 498 apartments and townhomes essentially can now build 240 of its 287 planned units before it has to secure financing for 50 affordable senior units. There were a few reasons given by the developer for the request.
The insurance coverage for the construction of buildings larger than three units has become extremely difficult to obtain in California, particularly in high-severity fire zones, according to Jonathan Frankel, vice president of New Urban West.
A challenge in getting the financing for the affordable side also has been an issue, which was part of the request for more time. A concern mentioned by a handful of residents at the meeting’s outset was that the commission might let the developer off the hook for building the affordable component.
“The request related to (more time for) building permits … that actually makes it more likely the affordable housing gets built — not less,” Frankel said, explaining the reasoning for the request.
“We are acutely aware of the need for affordable housing,” he said, adding it comes up in every jurisdiction where they build.
However, if more time doesn’t work to fix the market conditions for financing, then Frankel is asking for an in-lieu fee the developer could pay to get out of building the affordable units.
That was something the city staff wasn’t ready to recommend for a number of reasons.
Planning Commissioner Tim Burkhart called the staff recommendation a balance between the city letting the developer do what it needs to finish building and the city getting the project it planned.
“This seems to be a practical way to still provide a carrot and still provide a stick to get the whole thing done,” Burkhart said, adding that permission to finish the final 30 units was a significant carrot because, from a developer standpoint, that’s where a project’s profit margin is. “The last 50 are more profitable than the first 50,” he added.
“They have moved the goalpost,” said Planning Commissioner Nathan Keith, acknowledging there’s no guarantee in the plan that the affordable housing will be built. But the senior vice president of real estate for the Tejon Ranch development also agreed with Burkhart’s point that a trust factor exists because a developer’s “sweet spot” for profitability usually comes at the end of a project.
Planning Commissioner Denise Lite also asked about the potential to add a “stick” in the form of a financial penalty if the affordable component doesn’t get built.
“They want this project done, I assume that,” she said, but with her lawyer hat on, she said she had to ask what the contingencies were. “We’re in the business of making sure that’s going to happen.”
Acting City Attorney Carl Berger said that, because it’s a developer’s private property, such a contingency could be legally problematic.
Some of the concern came from the developer’s statements that funding for affordable housing in general is very competitive and has been very difficult on this project for a number of reasons.
That prompted the request by the developer for the potential to pay an in-lieu fee — which would be money paid by New Urban West per unit or per square foot of the 550-square-foot affordable units scheduled.
However, city staff had to recommend a rejection of that fee because the city has never conducted a study for such a fee or created a plan for how such a fee might help offset the construction of affordable housing.
A planned discussion on the city’s approach to affordable housing is expected to take place later this year, according to City Manager Ken Striplin.
