In 2009, the court case Palmer/Sixth Street Properties, L.P. v. City of Los Angeles brought an end to the inclusionary housing provisions of the Central City West Specific Plan - and in other cities across the State of California.

The policy, as enacted through the specific plan, required all residential developments containing ten or more dwelling units to either construct on-site affordable housing units or pay an in-lieu fee to finance their construction elsewhere.  Yet it was rendered invalid by the Second District Court of Appeal, which found that inclusionary housing provisions for rental units were pre-empted by the Costa-Hawkins Rental Housing Act.

Eight years after the practice was struck down in court, the "Palmer fix" emerged through Assembly Bill 1505 - which took effect in January 2018.  The legislation, authored by Assemblymembers Richard Bloom, David Chiu, and Todd Gloria, was enacted in direct response to the Palmer decision and authorizes cities and counties to reinstitute inclusionary housing requirements.

Now, Councilmember Gil Cedillo is calling for a "fair and equitable imposition" of the restored inclusionary housing provisions through phased implementation.  Cedillo, who represents City West, notes that many developments currently in the entitlement pipeline predate the reinstitution of inclusionary housing.  A phased implementation of the policy would allow projects currently in the entitlement stage to factor in the imposition of subsidized affordable units or an in-lieu fee payment while assembling financing - and also allow projects still in the pre-submittal stage to account for the added cost.

The motion also calls for the City to inform stakeholders about the reinstitution of inclusionary housing, noting that "its imposition at a late stage in planning may have an adverse economic impact on project feasibility and ultimately housing production."  This would have particular relevance to Downtown landlord Jade Enterprises, which is planning a two-building, 369-unit apartment complex at the corner of 6th and Bixel Streets.  Although the project was filed more than two years ago, the Department of City Planning recently informed the developer that it would be required to set aside 15 percent of its total apartments as affordable housing or pay an in-lieu fee.  The project's attorney told Curbed LA in March 2018 that the unforeseen financial hit would likely make the project unviable.

Cedillo's motion, which has been referred to the Council's Planning and Land Use Management Committee, instructs the Planning Department to draft an ordinance which lays out a phased implementation for inclusionary housing.  The proposed language would exempt any rental housing project with an active building permit application or complete planning application to be exempted from the policy for the first 120 days following the effective date of the ordinance.  After 121 days, a project would be required to provide one-third of the total affordable requirement or in-lieu payment, then two-thirds after 306 days.  The inclusionary housing provision would take full effect 485 days after the ordinance's effective date.

The proposed language would also allow a project that is subject to the Affordable Linkage Fee Ordinance to pay that fee-in-lieu of complying with the inclusionary housing requirements via cash deposit at an amount determined by the Planning Department.  That money would then be deposited into the Central City West Housing Fund.

The affordable housing set-aside requirement would also add an 8 percent very-low-income set aside as an alternative to the existing 15 percent low-income set-aside.

In a separate but related motion, Cedillo has also called for a report back from the City Attorney on whether AB 1505 would permit the City to adopt inclusionary zoning as a policy citywide, and what that policy might look like. He also has requested information on how an inclusionary zoning ordinance would interact with other methods of generating subsidized affordable housing such as the linkage fee and the Transit Oriented Communities guidelines.