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The Livermore City Council greenlit amendments to two housing projects this week that allow the developer to offer less affordable units on-site in exchange for in-lieu fees — proceeds are poised to benefit alternate, affordable projects in the city.
Applicable to Shea Serenity and Shea Aura, the project sites are both located along Portola Avenue with Serenity at the northeast corner of the intersection with Collier Canyon Road and Aura at the southeast corner of the intersection with Isabel Avenue.
Serenity was approved in 2022 for 299 units, including 89 for-sale condominiums and 210 for-rent apartments. Of the units, 60 were set for pricing at affordable rates and 51 were accessible units.
Aura was permitted two years later for 164 for-sale condominiums, including 33 affordable units and 17 accessible units.
Both projects complied with affordable housing requirements at the time of their approvals by offering the units on-site. Since then, applicant Shea Homes reported difficulty selling moderate-income units at Serenity and concern over a similar challenge occurring with the future construction of Aura. As such, Shea Homes requested alternative means of complying with the affordable housing requirements.
Offering its unanimous approval, the council gave permission to Shea Homes to convert up to 25 affordable for-sale units to market-rate homes across the two sites for a cost. But prior to the pay-out, city and Shea Homes representatives are set to hash out an agreement including the value of units at market-rate.
“In this interest rate environment, the holding cost of just leaving them empty and not sold for an extended period of time would be an extremely high amount of money that would serve no purpose,” Councilmember Steven Dunbar said during the meeting. “Meanwhile, we have developments on the table today that are in mind, that we are working on that this in-lieu fee can go towards – Walnut (Street Project) and Pacific Avenue (Senior Housing) Phase 2.”
Since the release of five moderate-income units last November and December at Serenity, one remains unsold, according to Frances Earl, Livermore housing and human services manager. An additional four units released in early March remain unsold.
The units are also advertised prior to hitting the market, she added.
According to Earl, five eligible buyers have declined to purchase a home, expressing to the city their concerns about financial uncertainty and the cost of ownership. To a lesser extent, restrictions on the resale of affordable-rate homes plays a role in the residences going unsold, she added.
The oversupply of moderate-income units is apparent elsewhere in the Isabel neighborhood, Earl said.
She considered the requested amendments “fairly unusual,” but noted that the city has previously allowed developers to fee-out of approved affordable units during difficult housing market conditions.
“We would love to sell them as affordable units because it’s financially equal to us,” Shea Homes Community Development Director David Best said during the meeting. “The problem is that we’ve had several of these homes unsold, finished, ready to move in for anywhere from three to six months.”
In Council member Evan Branning’s point of view, the proposal was prompted by market conditions as well as the developer’s choices.
In lieu fees to the city would be equal to the difference between the market-rate value — an estimated $785,000 — and the affordable rate.
Cutting 25 affordable units at the Shea Homes projects would fund subsidies for about 50 rental units at Pacific Avenue Senior Housing, according to Assistant City Manager Paul Spence.
“We should negotiate for the most possible money we can get to in-lieu fund,” Branning said. “That is then going to be turned around into housing for some of our most vulnerable residents.”
“There are good reasons to have (builders) doing inclusionary housing — lots of good reasons,” Branning said.
But in this sole instance, the amendments to accept in-lieus offer a “major” benefit to the community, he said.
“I was very opposed to this in the beginning and a lot of education got me to strongly in favor now, ” Branning added.
Vice Mayor Kristie Wang said she went through a swing in opinion, albeit one she describes as less severe, as she gathered information about the proposal.
Looking toward the future, Wang suggested that the city figures out how to deliver the most in-need housing.
“There is so much demand for affordable housing. It’s a shame to build housing that the market is not calling for,” Wang explained.
Mayor John Marchand also found himself having a change-of-heart on the proposed reduction of on-site affordable units.
“Like most of us up here, I had real problems with what I saw as the elimination of affordable housing that we had banked upon,” Marchand said.
His pivot was based on the leveraging possible with the use of in-lieu fees for senior housing.
Although Councilmember Ben Barrientos initially suggested tabling the decision, the council reached a consensus to amend the project.
The council’s decision aligned with the 4-1 recommendation by the Livermore Planning Commission at its May 5 meeting to approve the amendments, with Commissioner Nadine Horner casting the sole dissenting vote.
Prior to the council’s vote, three commenters expressed mixed opinions on the potential reduction of affordable units for in-lieus.
One speaker expressed support for the project amendments as a way to support the developer.
Landing on the other side of the argument, Livermore Valley Arts Director Jean King suggested that the developer should be held to the initial agreements.
“The city should not set a precedent of changing agreements because of changing financial markets,” King said during the public comment period.
The council clarified that its approval of the amendment did not set a precedent for future projects.
