Tustin votes to refund developer $290K in affordable housing opt-out fees
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Across the street from Columbus Tustin Park’s baseball diamond, construction crews hammered away at unfinished townhomes at the Jessup in Tustin.
The new 40-unit housing development is close to being completed with all townhomes already sold out.
But with the Jessup almost fully built, Intracorp, its developer, wanted to revisit its contract on Tuesday in seeking a refund of roughly $290,000 affordable housing in-lieu fees already paid to Tustin.
According to staff report, Intracorp agreed to build two affordable housing units on-site while paying the Voluntary Workforce Housing Incentive Program in-lieu fees as a public benefit in exchange for the city rezoning the property as residential.
“The goal of the City Council and staff is to try to accelerate development,” Councilman Ray Schnell said in support. “By removing impediments, fines and fees, that sends a clear message to builders, general contractors, [and] developers that we’re looking for ways to accelerate the pace of building and not be punitive.”
An apartment home project at Our Lady of Guadalupe Church in La Habra is the first of several housing developments the Diocese of Orange is planning in the county.
Intracorp originally sought the refund in September, but the City Council deadlocked on the move.
“What has changed since the council rejected this?” Councilman Lee Fink asked. “I don’t think anything has.”
A year ago, Tustin waived affordable housing in-lieu fees for three years in its Old Town and Red Hill Avenue specific plan areas.
The Jessup stands outside of those areas, but after the policy change, Intracorp petitioned for a refund.
A city staff report argued that granting the refund met a strategic plan goal of “economic and neighborhood development” by establishing “parity” with the in-lieu fee waivers elsewhere in Tustin.
“I feel confident that an approval today of this item demonstrates that the city is fair, that we are equitable, that if there is a policy we’re going to apply it to you,” said Tustin Councilman Ryan Gallagher. “That would also [send] a message to the business community that Tustin is open for business.”
Gallagher criticized affordable housing in-lieu fees approved in 2018 as part of the city’s Voluntary Workforce Housing Incentive Program.
He claimed the policy hasn’t led to a single unit being permitted and built in Old Town since that time.
“This council wants to build market rate and affordable housing, but we need to stop wasting our time and energy on programs that don’t work,” Gallagher said.
But Fink sounded the alarm about the Jessup’s refund being a potential gift of public funds.
“This isn’t in the downtown core, this isn’t Red Hill,” he said. “This was already baked in when the when that change was made. Housing is built. I would think we need to look long and hard at the liability for that.”
Cesar Covarrubias, executive director of the Kennedy Commission, called the refund “concerning” after the council meeting.
“It greatly impacts Tustin’s ability to create new affordable housing,” he said. “We don’t know what authority the City Council has to retroactively undo community benefits that are supposed to address affordable housing.”
The Jessup, which sold most of its townhomes for more than $1 million, built two townhomes at the very-low income level. At the council meeting, Schnell claimed the move amounted to roughly $2 million in revenue the developer would have made if they had been sold at market rate.
Councilman John Nielsen claimed the Jessup suffered what amounted to “double taxation” by building the two affordable townhomes and paying nearly $290,000 in affordable housing opt-out fees.
“That’s a bit draconian,” he said.
Nielsen dismissed Fink’s concerns about the refund being a gift of public funds and moved to approve it.
The City Council voted 4-1 to give Intracorp the money back, with Fink voting against it.
“This doesn’t help us build,” Fink said. “This just takes away a pool of money that we can use for affordable projects.”
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