More than 1,900 affordable homes were built in Orange County in 2023, the most in the six years since California cities and counties began annually reporting housing production by income levels.
Since 2018, Orange County has averaged building 6,800 housing units a year, though less than 15% have been affordable. Orange County is still losing residents, partly because much of what’s being built is at higher price points.
Cities throughout the county have developed new policies to get more affordable housing built, but housing advocates say more must be done.
“We are doing what we can, but it’s not enough,” said Art Brown, a Buena Park councilmember and president of the Southern California Association of Governments. “It will probably never be enough.”
State law requires California cities and counties to develop housing plans at all income levels, including sufficient affordable housing – the Southern California Association of Governments is charged with dolling out allocations for how much each should plan for to meet future housing needs in the state. Failing to create the zoning and plans to meet housing allocations could lead to state lawsuits against the community, losing some local control over making decisions on developments and fines of up to $600,000 a month.
Last year was the second in a row that Orange County saw more than 1,000 affordable units built – 6,900 units in total were developed. Building the most homes were Santa Ana, with 1,113, and Irvine, with 1,368.
RELATED: Here’s how many housing units each OC city reported built in 2023.
Cesar Covarrubias, who leads the Kennedy Commission, a nonprofit that advocates for affordable housing development in Orange County, said the numbers show that there is robust development happening in the county, but there are many areas where cities can better leverage policies to ensure more affordable housing is included.
Cities, Covarrubias said, should extract community benefits for affordable housing when rezoning properties and look at creating laws where new housing developments are required have some percentage of units set aside to be affordable.
Those laws, which cities such as Santa Ana, Irvine, La Habra and Laguna Beach already enforce, require new housing developments to set aside anywhere from 4% to 25% of units to be affordable or pay an in-lieu fee, which can then be used to support affordable housing elsewhere in town.
“You need to have strong policies to be able to capture that affordability,” Covarrubias said. “Otherwise, it’s not going to be around in the long term. Once those sites get built, you don’t have any other sites.”
The state uses the area median income for each county to determine what is considered affordable. In Orange County, for a household of four that is $127,800 in annual income. So to qualify for low-income housing, a household of four can earn up to $114,800 a year, or $80,400 for an individual.
To avoid a flood of homes outside of many household’s reach, cities are designated how many units should fall in the very-low-, low-, moderate- and above-moderate-income levels.
In Santa Ana, the city is mandated to plan for 3,137 housing units by 2029, 606 of which have to be very-low income. Of the permits that have been reported by the city toward fulfilling those requirements, 296 fall in the very-low bracket. The city also reported 3,487 above moderate-income units, well exceeding the state-mandated goal of 1,624 units.
Ali Pezeshkpour, Santa Ana’s planning manager, said the number of low- and very-low-income units should increase as more projects get underway.
Two new projects will break ground this year, said Judson Brown, Santa Ana’s housing manager. One will be developed by Habitat for Humanity of Orange County, creating six new affordable homeownership opportunities for low-income families. The other is being built by the Illumination Foundation, with 11 rental units for transitional-age youth and senior citizens.
A development underway now that Pezeshkpour pointed to as another example, is an old motel that will be converted into a permanent supportive housing complex, Estrella Springs, with studio apartments for homeless veterans and those with mental health issues.
Developing housing for community members with a combination of needs beyond just a physical property requires more commitment and expertise than simply constructing buildings, Pezeshkpour said.
“I think it’s just a matter of understanding that some of the income levels have very niche segments for the community that they serve,” Pezeshkpour said. “And there are certain types of developers that really specialize in that type of construction project and actually have the skill set and the financing needed to make them happen.”
Covarrubias attributed some of the boost in the number of affordable housing units reported to Project Homekey, where the state funds turning motels and other similar properties into permanent supportive housing. Part of Proposition 1 which was narrowly passed by voters in the March primary is $2 billion in funding for more Homekey housing projects.
A creative solution, he said, may be issuing a countywide housing bond that could accelerate the development of affordable housing, as was done in Santa Clara County in 2016. Santa Clara County’s $950 million affordable housing bond has led to more than 5,000 new apartments being built and $25 million to support first-time homebuyers, according to county data. That bond is being repaid by a property tax levy of about $12 per $100,000 of assessed home value.
Even with the efforts cities are making to meet state mandates and encourage more affordable development, there currently are many challenges to getting units built. High building costs, coupled with high interest rates and rising insurance costs, just add to the problem of building new homes that people can afford to live in, Brown said.
“Now at this point, the interest rates honestly have kind of scared off a lot of the financing options that typically are available to us. What we’re doing at this point is getting ready for those interest rates to fall so that we can jump into action again,” Keri Bullock, the city of Irvine’s housing manager, said. “And we’re lining up land, projects and financing options and what that’s going to look like when it’s financially feasible to jump back into the building market. But, I think just the cost of construction was prohibitive.”
Brown said another obstacle to affordable housing construction is that homeowners “go ballistic” when housing projects get proposed.
The solution to community pushback in Santa Ana has been to involve residents in the planning process to show that affordable developments can improve neighborhoods, Pezeshkpour said. He said when La Placita Cinco, an apartment complex on Fifth Street built in 2021, was being discussed, community members pushed back.
“When the project was first proposed, they wanted to build a four- to five-story building with all studios and one-bedroom apartments and virtually very little parking there,” Pezeshkpour said. “The Santa Ana process for development requires early engagement of the community through community meetings, and I think that’s a highly successful outcome illustration of how that process really helps shape a project to become better in a way that leaves the community feeling like they didn’t lose anything. And not only that, but they’re actually gaining something from a new investment.”
In the case of La Placita Cinco, the building’s height was reduced, units were changed to include more bedrooms and parking space was increased, he said.
The city of Irvine is required to plan for 23,610 units by 2029. The city in the current planning cycle has reported permits for 226 units affordable to very-low-income earners, out of the 6,396 required by 2029. The state also requires the city to encourage the development of 8,671 units at the above moderate-income level, of which it has permitted 3,588 in the current planning cycle.
Bullock said the reason low-income units were not being built at the same rate as above-market is because they are not seen as “financially beneficial” to developers.
“That’s why the inclusionary policy is so important, because all those market-rate units would be built with no affordable units if we didn’t incentivize the developer and require them to build those below-market-rate units,” Bullock said.
Costa Mesa’s City Council this month approved a new law to require developments larger than 50 homes to have 10% of units be low income or 5% very-low income. Anaheim is looking to establish a housing trust that could fund grants for affordable rental housing or first-time home buyers. San Juan Capistrano is building a new City Hall with a 50-unit affordable housing complex.
“The implementation of those programs, policies and commitments are going to be key,” Covarrubias said. “So we hope that that is what really pushes some of the new affordable housing development to move forward.”
