Irvine eyes 4,536 new rentals: Why building homes isn’t always war

In an age where conflict over homebuilding appears to be the norm, an intriguing deal in Irvine with land giant Irvine Co. could help the city meet its state-approved homebuilding goals.

The tentative “memorandum of understanding” would see Irvine getting 4,536 new apartments at six sites – 1,025 with affordable rents. Developer Irvine Co. will pay $65 million in fees for the construction that could be completed to meet the city’s 2029 home-production deadline.

It’s a road map for 2,157 rental homes at three sites previously announced by Irvine Co. plus another 2,379 units at three other locations.

Now, city council approval is required for this memorandum to move ahead. And Irvine politics is hard to handicap as the debate over the deal begins at Tuesday’s city council meeting. But it’s noteworthy that the deal was negotiated by a city committee that includes Mayor Farrah Kahn and Vice Mayor Tammy Kim.

Irvine’s seemingly cooperative process runs in sharp contrast to what’s going across Southern California.

• At least nine cities in the region face housing proposals from developers trying to bypass the normal approval process because those cities don’t have state-approved state-approved housing goals.
• Or there’s La Habra, which is being sued by a homebuilder after it canceled a previously approved housing project.
• And there’s Huntington Beach, where state officials and the city are suing each other over the local government’s refusal to adopt some of California’s pro-housing development laws.

Now you’d think homebuilding would be simple. But getting building plans approved anywhere in California requires cities and developers to navigate a maze of regulations. And some of those rules can force outcomes neither side really wants.

So, to get anywhere close to California’s lofty housing dreams, adult conversations between stakeholders with serious give-and-take become a necessary requirement.

Look, the somewhat symbiotic relationship Irvine and Irvine Co. is a half-century old. So it’s not what every municipality faces.

But Irvine Co. believed the homes could have been built without much city oversight or fees paid. Conversely, the city could have made that construction as challenging as possible. Let’s look inside the deal to get a glimpse of the tradeoffs involved.

So what does Irvine get?

Homes: To meet state goals, the city needs 23,600 new units by 2029 with roughly 15,000 deemed affordable for households earning less than local median wages. Irvine Co.’s plan would provide a big step toward meeting those intense demands.

Cash: There’s as much as $65 million paid to the city – a $14,500 per-unit fee – and the freedom to use that money as local policymakers see fit.

Financial flexibility is important to the city because a traditional affordable-housing deal would mean developer fees could be spent only on park construction. And the city, home to the ever-evolving Great Park project, already has plenty of recreational spaces.

Control: The state is trying to limit housing supervision by all cities because that oversight often throttles residential development. But Irvine Co. agreed that all plans for these units will go through typical city approvals.

“It’s a deal everyone could feel good about,” said city manager Oliver Chi as it “respects the principles of the original master plan.”

What does the company get?

Rentals: This is not charity work. Obviously, Irvine Co’s apartment portfolio of roughly 65,000 units statewide will grow.

Location: The memorandum allows the developer to turn vacant or unproductive land into non-traditional sites for income-generating housing, primarily in the city’s jobs hub around Irvine Spectrum.

Corporate tenants: Do not forget about the company’s huge portfolio of office and industrial properties across the city, especially in the Spectrum neighborhood.

Orange County employers are desperate for talent and places to house those workers. Housing near workplaces is especially valued. These rentals are close to Irvine Co.-owned retail sites, too.

So, view the $65 million in fees as an Irvine Co. investment that benefits many parts of its business.

“Few cities have the ability to master plan new communities next to Fortune 500 companies, innovative tech startups, and world-class hospitals,” said a statement from Irvine Co. senior vice president Jeff Davis. “This framework agreement reflects that unique opportunity to meet the needs of Irvine’s workforce, businesses, and residents.”

And what will residents get?

Rent relief: The plan calls for 337 units with rents for tenants earning annual household incomes of about $50,000; 160 units would be reserved for those earning up to $80,000; and 528 for those making up to $100,000.

Extended relief: Rent limits on 1,025 rentals, adjusted for inflation, would last for 75 years vs. the typical 30-year arrangement.

Added savings: It’s not part of the memorandum but Irvine Co. says roughly half of the remaining units built would be smaller than the landlord’s usual specs. That will mean the company, known for its high-end and high-priced apartment complexes, will offer rents well below what it typically charges.

Common living: These apartments also might not fit your possibly tarnished view of affordable housing.

Full-price units and residences for lower-income folks will be mixed within the complexes. And the housing will be fashioned with a Mediterranean look much like the company’s stylish Los Olivos complex across the 405 from the Irvine Spectrum shopping center.

What’s the bottom line?

Housing development should be pretty simple.

But when the state’s economic needs clash with local political desires and the industry’s profit demands you often get a combustible brew.

In this Irvine deal, the city needs housing, especially affordable rentals. And Irvine Co., by far the city’s biggest apartment developer and owner, has properties to spare – empty stores and land once planned for uses that are out of favor.

A reasonable match provided the foundation for a deal.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com