Policy

May 21, 2024

Dear Craig,

I write to follow up on LandWatch’s comments at last week’s Planning Commission meeting and LandWatch’s April 18 letter to the Planning Commission. We would appreciate the opportunity to talk with you further about an alternative approach to developing a site inventory for the housing element that will meet the County’s RHNA allocation while also limiting sprawl, reducing greenhouse gas emissions, affirmatively furthering fair housing, and following best practices for sustainable land use planning. Please let me know good days/times to discuss this further.

I also write to expand on Landwatch’s comments about the draft Housing Element in the context of historic (actual) housing production data and AMBAG’s integrated economic and housing forecasts.

In our comments and correspondence, we noted that both as a matter of law and as a matter of good policy:

• Monterey County planning staff should not confuse HCD’s criteria for an adequate site inventory for lower income units with HCD’s distinct requirement for programs to address constraints on housing production and;
• County staff’s proposal that the housing element site inventory rely on the 12% provision of lower income units in the existing IHO to identify adequate sites for lower income units is both bad policy and inconsistent with HCD guidance.

I write now in response to the consultant’s presentation at the Planning Commission hearing in which she repeatedly referenced the importance of “fact-based” policy making. HCD’s guidance is absolutely clear that an inclusionary housing ordinance (IHO) should not be considered to justify “appropriate zoning” for lower income units in the development of a site inventory. HCD’s four requirements for identifying lower income housing sites – density, parcel size, AFFH, by right permitting – are the relevant legal requirements. The existence and efficacy of an IHO, are simply not relevant to whether sites meet these four requirements. Any site that meets the requirements can be counted. The County is not limited to the 12% mandated by the IHO. This is a matter of law, not fact.

However, as a matter of fact, the County’s reliance on its IHO to provide affordable housing is unsupported. Specifically, please note the following:

Monterey County’s reliance on its Inclusionary Housing Ordinance (IHO) to meet its RHNA for affordable units is not supported by historic data.

Monterey County’s draft Housing Element plans for creation of 10,257 housing units in the next eight years. This includes 6,736 new above market-rate units, 2,447 “affordable” units (affordable, that is, to Very Low and Low income households), and 654 moderate income units. The plan assumes that half of the affordable units would be created through the County’s Inclusionary Housing Ordinance, which mandates that at least 12% of all units be affordable. (Table ES-4 from Monterey County Draft 6th Cycle Housing Element). Because it is unreasonable as a matter of economics to assume that private developers could produce 10,257 housing units in eight years (2023-2031), it is unreasonable to assume that 12% of these units will be affordable units compelled by the IHO.

First, the County’s projections of market-rate housing formation ignore economic reality, specifically job growth, which drives housing. Expecting 6,736 new market-rate homes for a single RHNA cycle is unrealistic in light of the 30-year 2,625-unit AMBAG estimate of housing formation. The AMBAG 2022 Regional Growth Forecast, Attachment 2, Final Draft 2022 Subregional Growth Forecast,  which integrates economic and job growth, household formation, and population models, estimates only 2,625 additional households being added to unincorporated Monterey County in the 30-year period 2015-2045, almost four RHNA cycles. In rough numbers, AMBAG estimates that unincorporated Monterey County will in total add ~ 100 housing units annually over the next 30 years. Monterey County’s RHNA planning obligation is for more than 800 housing units annually for the next eight years. Notably, virtually every AMBAG estimate over the past 20 years has exceeded actual household formation.

Second, the County’s plan for very low and low income housing formation relies on the failed historic performance of the County’s Inclusionary Housing Ordinance. Planning for half of the planned 2,447 affordable units to be created through the Inclusionary Housing Ordinance is unrealistic. Data supplied by  Monterey County housing staff indicate that in the 38 years between 1985 and 2023, the Inclusionary Housing Ordinance constructed, or assisted in construction of, 1,123 very low and low income units. Annualized over those 38 years, this represents only 30 affordable units per year. At this historic rate of affordable housing creation, it would take approximately 64 years to build 1,177 very low income and 740 low income housing units. Earlier (2022) data provided by the County suggested that it would take even longer.

Monterey County’s progress on its 5th Cycle Housing Element reinforces the challenges that the County faces in overcoming a fundamental economic mismatch between housing prices and incomes, which limits production of all housing.

Monterey County’s recent report on its 5th Cycle Housing Element (2015-2023) progress, presented to the Board of Supervisors last month, makes clear that the County’s housing strategy has not overcome market forces that inhibit housing production. During the eight-year reporting period for the 5th cycle, on average the County issued only 241 total building permits for new housing units each year, or 30 per year. Seventy-five percent (75%) of all issued building permits were for homes for buyers with above moderate incomes (i.e., market-rate). A significant number of these are likely out-of-county buyers.

In conclusion, treating the IHO mandate for 12% affordable units as a limitation on the number of units in sites that meet all of HCD’s requirements for lower income units is a legal error and a recipe for permitting extensive and unnecessary sprawl. But even if it were not a legal error, there is no factual basis to rely on the IHO as the basis to develop the Housing Element site inventory. It makes no economic sense to plan for more market rate units than are factually foreseeable in order to justify the site inventory for lower income units. And it makes no economic sense to rely on the IHO to actually produce lower income units in the numbers assumed in the site inventory.

Thank you for the opportunity to comment. I look forward to talking with you further.

Best regards,

Michael D. DeLapa
Executive Director