July 6, 2017

Los Altos Online: Lawyer claims Los Altos can’t curb developers’ profits


An article by Asher Kohn in the July 5th edition of Los Altos Online discusses local tensions arising from a draft Los Altos ordinance that would change the City’s density bonus regulations to further incentivize the construction of affordable housing in Los Altos.

Kohn reports on SV@Home’s position on the State Density Bonus Law, as well as that of Los Altos’s State Assemblymember Marc Berman, which highlight the importance of density bonuses and other incentives to driving the creation of more affordable housing in Silicon Valley.

The Los Altos Planning and Transportation Commission is scheduled to hold a public meeting to address the updated density bonus law later this month.

See the original story at Los Altos Online.

Lawyer claims LA can’t curb developers’ profits

By Asher Kohn

Some Los Altos residents do not want housing developers to increase their profit margins as a result of the new State Density Bonus Law – but they may not have a choice.

According to Fred Haubensak, a Los Altos resident who has collected more than 200 signatures on a petition supporting lower building heights on El Camino Real, developers see density increases as a cash-grab.

“Developers want to know where they can put higher density, which is the primary variable for business revenue and profit,” he said.

One local real estate lawyer claims that the city of Los Altos cannot require a developer to disclose its profit margins on a housing project within density bonus regulations.

“Statements of the developer’s projected profit margin are not required and irrelevant,” said Wilson Wendt, a real estate lawyer with Miller Starr Regalia. “No findings are required for a density bonus. If the project provides the requisite percentage of affordable units, it is entitled to the corresponding density bonus by right.”

Wendt wrote to the city of Los Altos in response to the city’s drafting of an ordinance that would apply California law in a local context. The draft, released last month, eases density restrictions – such as setbacks from nearby housing and height limits – if developers include below-market-rate units in their proposals. These variances include options such as a 35 percent increase in floor-to-area ratio or 11 additional feet of height.

The law’s primary intention is to boost the availability of affordable housing, according to Wendt, so it does not address developers’ profits.

“The entire goal of the State Density Bonus Law is to encourage the construction of more affordable housing, and the profits accruing to the developer are irrelevant,” he wrote to the council. “Obviously, the profit margin is essential in determining whether the units can be sold and/or rented at affordable levels, but once that commitment is made, there is and can be no restriction on the profit flowing to the developer.”

State law mandates that below-market-rate units are required to stay below the market rate for the lifespan of the project.

“The transferred land and the affordable units shall be subject to a deed restriction ensuring continued affordability of the units,” according to AB 2501.

A representative of SV@Home, a nonprofit affordable housing agency, said the organization supports density bonuses in Los Altos.

“The Density Bonus Law allows developers to increase density in order to provide affordability,” said Pilar Lorenzana, deputy director of SV@Home. “Typically, cities will provide a number of incentives to developers because they think affordable housing is a good idea. (Los Altos) has land right on El Camino Real that is ready for housing, and the city can take action to ensure that the corridor is used to its full potential.”

State Assemblyman Marc Berman, who represents Los Altos, Los Altos Hills and Mountain View, commiserated with the need for new solutions for affordable housing.

“Silicon Valley, the Bay Area and all of California is in a significant housing crisis that has been compounded by years of building too few homes of all types, from affordable housing to market-rate housing,” he said. “My focus in the Assembly is on supporting policies that incentivize the development of the desperately needed housing stock across the state to meet our needs.”

The Los Altos Planning and Transportation Commission is scheduled to hold a public meeting to address the updated density bonus law later this month.

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