Serious rifts opened up at the Planning Commission and the City Council in the last two days on housing. Given that 2024 is looking to be a big year for housing, it’s worth examining at these disagreements in detail as they will likely come up again (and again).

First, there is a clear divide on the Planning Commission regarding the power and role of city government when planning for housing (yes, that’s a big problem). On the one hand, Commissioner Andrade and Commissioner Vivar appear to believe that the inclusionary housing ordinance is the city’s way to guarantee a certain number of affordable homes will be built in the city. For them, and for the affordable housing advocates that called in or spoke in public comment, the only question is whether the thresholds for inclusionary housing set by the ordinance are sufficient to meet the overwhelming demand from low and very low income housing. They appear to be assuming such housing will be built regardless of the thresholds because the profits offered by developing in Costa Mesa are so enticing.

On the other hand, Vice Chair Toler and Commissioner Zich clearly see the inclusionary housing ordinance as a constraint on development and they are wary of inhibiting housing production through over-regulation and taxation. In their view, development needs to be incentivized to locate in Costa Mesa, and inclusionary housing requirements could function like a disincentivizing tax. This side seems persuaded by the notion that developer “profits” are fixed due to the nature of construction finance, whereby developers must both pay that profit over to the bank that lends it money (in the form of interest) as well as the equity investors that provide it with equity financing (in the form of returns). The developer as well will need some profit to compensate it for its time and effort as well as the significant risk associated with urban infill development. Just you likely wouldn’t gamble $10 so that you could win $100 at 100:1 odds, but likely would gamble $10 if you could win $10,000,000 with 100:1 odds, developers need to have a big pile of money waiting for them to take the risk that their whole project could fall through and they could lose everything.

Both sides clearly want more housing to be built in Costa Mesa. But one side sees housing production as a backdoor welfare program intended to target the needs of our low-income residents, while the other side sees an increase in the availability of housing at all price points — including many at the “market” rate — as a long-run economic policy to ensure housing affordability and stability.

Obviously I have my own opinions about this, and if you’ve been following along you know that I clearly side with Vice Chair Toler and Commissioner Zich. Frankly I think the Staff and our consultant, KMA Associates, does as well. But, as Commissioner Zich noted in his comments, this is a true conflict that simply has not been reconciled, either among the interested public nor in the chambers. He went the extra mile to suggest that the conflict is so acute that the Planning Commission should not send the draft ordinance in its current form to the City Council for consideration until the conflict is resolved. Commissioner Zich lost that point — the ordinance will go to the City Council with a few tweaks early next year — but it made for a dramatic moment in the chambers. Well, as dramatic as Planning Commission gets.

As I mentioned in the prior post, the City Council also held a study session on the City’s housing efforts, with most of the focus being on the City’s planning process for the Fairview Developmental Center site (FDC). I’ve written before about how the public meetings for FDC have been pretty uninspiring, and once again this Study Session didn’t really move the ball forward.

But it did provide an interesting moment during Council discussion when Councilperson Loren Gameros made a passionate plea for more homeownership opportunities in the city, and expressed a degree of exasperation that the housing production conversation has focused on building rental units. “I don’t think it is anyone’s goal to become a renter, everyone’s goal is to become an owner,” he said during his first round of comments. Later he expanded on this:

If we are going to develop places to live, how many of them are going to be given an opportunity to own these properties? How many? What are we doing for that? We’re doing a lot for rentals. Ok fine, we put someone in a rental unit. I’m not saying I’m against it. But what are we doing to provide homeownership for people? That’s my question.

Loren Gameros, City Council Study Session, December 12, 2023

Although he was absent, Councilperson Don Harper has complained in the past about Costa Mesa’s large percentage of renters as compared to homeowners; as of the most recent Housing Element, about 60% of Costa Mesa households are renters. Planning Commissioner Jon Zich also called the city “upside down” on that metric on Monday, implying that the city would be much better off if more residents owned their homes, and that our housing policies should be oriented towards achieving that goal rather than broader affordability.

The rest of the City Council, on the other hand, seems resigned to what is likely the grim reality here: that, due to a combination of extreme scarcity, valuable land, substantial inflation and macroeconomic conditions, stimulating the production of large numbers of for-purchase homes is simply out-of-reach for what city policy can provide. This is why the Mayor earlier in the meeting intoned that the Planning Commission shouldn’t “spin its wheels” on having the proposed inclusionary housing ordinance cover for-purchase properties.

That said, Councilperson Gameros is right about one thing: it’s politically very difficult to tell the public that the dream of homeownership in Costa Mesa is effectively dead for around 80-90% of households. Yet until the city, state and federal governments get serious about what it will take to stimulate condo and small lot, fee simple for-purchase homes, its hard to see how we achieve a different result. I touched on the challenges of building for-purchase condos in California previously but it is such a vast topic it probably deserves its own post, which hopefully I’ll do at some future date.

For now, let’s just keep and eye on the renter-homeowner debate. I doubt Councilperson Gameros has said his piece on this and I expect Councilperson Harper will carry that banner as well when he returns to the dais. With deep ideological and intellectual divisions at both the Planning Commission and City Council, Costa Mesa’s 2024 housing policy looks off to a rocky start.

* Note that the title is unabashedly plagiarized from Thomas Sowell’s excellent book A Conflict of Visions: Ideological Origins of Political Struggles, which I cannot recommend highly enough.