Housing Developers Return For More Breaks From Desperate Hayward

Nov. 18, 2011 | Inclusionary housing ordinances are usually a good thing. Progressives laud their existence for harmonizing the mix of affordable housing in urban settings. In Hayward, though, housing developers looking for a reason to bypass such ordinances, are reaping great benefits at the expense of the city’s inability to attract development in a poor economy.

Last December, the Hayward City Council unanimously approved a significant dress down of it inclusionary housing laws when it lowered the percentage of affordable housing units from 15 to 10 percent for single family dwellings and 7.5 percent for condominiums and townhouses. The temporary relief ordinance, which run through the end of December 2012, more importantly capped the amount developers are charged by the city “in-lieu” of building affordable housing at $80,000 per development–way below the amount other cities charge.

The transaction removed any incentive for developers to construct affordable housing in Hayward. And projects planned without assistance from the city are exempt from even paying the paltry in-lieu fee. According to a staff report from last December, the city was aware its $80,000 fee was shockingly below what other municipalities charge for bypassing the minimum of building a mere 10 percent of the homes for affordable ownership. Instead, staff indicated the going rate for in-lieu fees were typically between $190,000 and $350,000.

The in-lieu feature built into various inclusionary housing ordinances is meant to give developers a break when their projected developments are not suitable for an affordable housing component. Funds paid by the developers to cities to remedy this fact are meant to be pooled in a trust fund to further incentivize housing in other areas, but in Hayward’s case, the ordinance is being subverted for the developer’s bottom line. The previous iteration of the interim ordinance also allowed developers to further pass their costs down the line by allowing them to defer payment of in-lieu fees until the close of escrow or up to a year after the city granted a certificate of occupancy. The city, though, rethought the last perk. Assistant City Manager Kelly Morariu said the arrangement was “untenable” and feared the city risked losing track of some in-lieu payments owed to them.

Hayward has been particularly stymied by the last recession’s death grip on local economies. The self-proclaimed “Heart of the Bay” was already into economic decline well before the housing market took a catastrophic nosedive four years ago. Hayward’s inability to attract development to its downtown and its scaled back projects around the South Hayward BART station may have led city leaders to bend over backward for developers, who themselves are struggling with high inventory and few buyers.

Not surprisingly, housing developers swooned over Hayward’s amended inclusionary housing ordinance. Last December, one council member referenced the support of former state assemblyman John Dutra, who is also a multi-millionaire developer in the area. The breaks lavished among developers willing to do business in Hayward has created an insatiable hunger for more.

This week, city staff asked the council to further amend the inclusionary housing ordinance to further ingratiate developers who want in on the gravy train. Several unnamed projects who signed deals under the previous ordinance, but who have not begun construction, complained to the city. The amendment, unanimously approved last Tuesday, grants those projects the benefits bestowed by the council’s approval of interim relief last December. Whether the city’s desperate attempt to procure any type of construction projects at any costs ever comes close to being a net gain is unknown, but hard to conceive. The city is willing to take the gamble. If and when Hayward sees the fruits of its incentives to developers, though, might be as speculative as the housing market its putting its faith in to pick up the local economy.