Costa Mesa turns down ‘workforce housing’ proposal near South Coast Plaza – OCRegister

Plans to turn an upscale 250-unit building near South Coast Plaza into “workforce housing” affordable to middle-income residents won’t go forward, after Costa Mesa city leaders decided the proposal – not unique in the state, but the first of its kind in the city – wasn’t a good fit.

The proposal would have converted an existing building by the Segerstrom Center for the Arts, taking advantage of a fast-growing program that allows developers to enter partnerships to sell tax-exempt bonds, buy existing housing and lower the rents for tenants who qualify.

Developer Legacy Partners planned to partner with the California Statewide Communities Development Authority to issue $170 million in tax-exempt bonds to buy the building at 580 Anton Blvd. Property taxes would have been waived for 35 years, meaning the city, Newport-Mesa Unified School District and others would lose a combined total of nearly $750,000 a year in tax revenue.

While several Southern California cities have approved similar projects, Costa Mesa city staffer raised red flags about the proposal for the building on  Anton Boulevard, saying it “would pose significant risks and costs” and yield “only modest affordability gains,” according to a report to the council.

The school district’s tax loss – about $315,000 annually, the city’s analysis said – was a major sticking point for District 2 Councilman Loren Gameros, whose district includes the South Coast Plaza area. He doesn’t want the students in Newport-Mesa schools, where his children attend, to lose out, he said Monday, Oct. 25 – and he made that clear to the project’s partners early on.

But two of the council’s seven members – Mayor John Stephens and District 6 Councilman Jeffrey Harlan – thought the council’s decision Oct. 19 to reject the proposal was throwing away a rare opportunity to help low- to middle-income residents who may struggle to pay rent.

“We need workforce housing in Costa Mesa. This was the only project we had in the pipeline to address this concern for at least a few years,” Stephens said Monday.

“The project would not have had a material impact on the city’s budget and would have provided $1.1 million annually in rent relief,” he said. “We also had the opportunity to benefit from the sale of the property 30 years down the road. I’m disappointed we didn’t take advantage of the benefits of this project.”

The city is working on a long-term housing plan, required by the state, that would accommodate more than 11,000 new homes over the next eight years, but Stephens sees big challenges to getting affordable homes built – particularly at the “missing middle” income level.

Two near-term affordable projects include building senior housing next to the city’s senior center and a state-funded plan to convert a motel into supportive housing for people coming out of emergency homeless shelters.

But those are only open to certain kinds of tenants – and with about 35% of city residents spending 40% or more of their monthly income on housing, “all kinds of people are being pinched” by high costs, Stephens said.

The council formed an ad hoc committee to look at housing issues and potential solutions, but Stephens said even the best ideas would take several years to turn into actual rooftops, and most new projects that need a zoning change and would add 40 or more units face the added hurdle of a public vote. That’s because of Measure Y, a 2016 initiative whose backers argued that more high-density apartments in the city would worsen traffic and increase the strain on city services and amenities.

Stephens said while it’s impossible to know how many potential developments may have been scuttled by Measure Y, after five years there hasn’t been a single public vote under its provisions.

Even if the council were to approve a rule requiring new developments to include a percentage of affordable units, it would be hard to design a project that wouldn’t trigger a vote, which adds time, expense and uncertainty to an already lengthy process, Stephens said.

The ad hoc committee is expected to discuss, with community input, whether to propose changes to Measure Y and also what other avenues the city could take to get new affordable homes built and help people who are already struggling to stay housed.

But new policies will take time to craft, and not everyone thinks there’s time to wait.

As Councilman Harlan put it at the council’s Oct. 19 meeting, “I don’t want to ‘elevate the conversation’ anymore, I want do something about it.”

While the council has spent a fair bit of time talking about housing policy, he said, “the heavy lifting, though, comes in actually getting projects built.”